Composition Scheme vs Regular GST Scheme – Which One Should You Choose?

Running a business and confused between the Composition Scheme and the Regular GST Scheme? You’re not alone. This is one of the most common questions among small and medium business owners in India.

Let’s break it down in a clear and practical way.

First Things First – What Are These Schemes?

Under GST, you’ve got two ways to go:

1. Composition Scheme – For small businesses that want fewer hassles. You pay tax at a fixed rate on your turnover. No need to worry about input tax credit or monthly filings.
   
2. Regular Scheme – For businesses that need full flexibility. You collect GST from customers, claim input credit, file regular returns, and can trade across states.
   

Who Can Go for Composition Scheme?

If your total annual turnover is up to ₹1.5 crore (or ₹75 lakhs in a few northeastern states), you’re eligible.

But it’s not for everyone. You can’t opt for this if:

• You sell across state borders
  
• You sell through online platforms like Amazon or Flipkart
  
• You make or sell ice cream, tobacco, or pan masala
  
• You want to claim input tax credit
  

And What About the Regular Scheme?

Anyone can go for it – no turnover limit. It’s ideal if:

• You buy a lot of goods/services and want to claim ITC
  
• You sell to businesses who demand GST invoices
  
• You’re dealing across states
  
• You want to grow fast and keep all options open
  

Yes, it involves more compliance – monthly returns, reconciliations, proper invoicing – but it gives you more power.

Let’s Talk About Tax Rates and Returns

In the Composition Scheme, you pay a flat rate:

• 1% for traders
  
• 5% for restaurants (non-alcohol)
  
• 6% for service providers
  

You file quarterly returns and an annual summary. That’s it.

In the Regular Scheme, tax rates depend on what you sell. You might charge 3%, 5%, 12%, 18%, or 28%. You file monthly returns, claim input credit, and issue tax invoices.

So… Which One is Right for You?

Go for Composition if:

• You run a local shop or restaurant
  
• You don’t deal with businesses that want tax invoices
  
• You prefer simple tax and fewer filings
  

Choose Regular Scheme if:

• You’re scaling your business
  
• You need input tax credit
  
• You’re selling outside your state or through online platforms
  

Final Thoughts

The Composition Scheme is all about simplicity. The Regular Scheme is about flexibility and growth.

Still unsure? Ask yourself: Do I want to keep it simple or do I need more room to grow and claim benefits?

When in doubt, talk to a GST consultant – a quick chat can save you months of headaches.