GST composition scheme: is it right for your shop?

Who can opt in

• Traders and manufacturers with turnover up to ₹1.5 crore in the previous year
• Restaurants not serving alcohol, within the same limit
• Service providers with turnover up to ₹50 lakh under a separate composition option
• Businesses not selling goods inter-state or through e-commerce operators that collect tax at source

Tax rates

What you give up

• No input tax credit on purchases
• You issue a bill of supply, not a tax invoice, and cannot show GST to customers
• Business buyers cannot claim credit on purchases from you
• No inter-state sales of goods
• You must display “composition taxable person” at your premises and on bills

Returns under composition

Composition dealers file CMP-08 every quarter to pay tax, usually by the 18th of the month after the quarter, and GSTR-4 once a year. This replaces monthly GSTR-1 and GSTR-3B.

How to decide

1. List who your buyers are. If most are GST-registered businesses, composition usually loses you customers.
2. Estimate input tax credit you would lose on purchases.
3. Compare composition tax on turnover with regular GST minus credit.
4. Consider growth: if turnover may cross the limit soon, you will move to the regular scheme anyway.

Many kirana stores, sweet shops and small restaurants in Gaur City and Noida Extension markets find composition simpler. Businesses selling to offices or other shops usually stay regular.

Opting in and out

New registrants can choose composition in the registration application. Existing taxpayers opt in before the start of the financial year. You can opt out at any time, and you move out automatically if turnover crosses the limit.

Frequently asked questions