comparison
GST composition scheme vs regular scheme
By Shivam Bhandari · Reviewed 31 October 2026 · How we write
Small businesses can choose the GST composition scheme to pay tax at a low fixed rate on turnover with simpler returns — but they give up input tax credit and some flexibility.
Side-by-side comparison
| Aspect | Composition scheme | Regular scheme |
|---|---|---|
| Who can opt | Turnover up to ₹1.5 crore for goods/restaurants (lower in some states); up to ₹50 lakh for services | Any registered business |
| Tax rate | Fixed: 1% for manufacturers and traders, 5% for restaurants, 6% for services | Normal GST rates on each supply |
| Input tax credit | Not available | Available |
| Collect GST from customers | No — tax is paid from your own pocket | Yes |
| Invoice type | Bill of supply | Tax invoice |
| Inter-state sales | Not allowed | Allowed |
| Returns | Quarterly CMP-08 and annual GSTR-4 | Monthly or quarterly returns |
Which should you choose?
Composition scheme
- · You sell mainly to final consumers within your state.
- · Your margins are healthy and purchases have little GST.
- · You want simple compliance.
Regular scheme
- · You sell to GST-registered businesses who want input credit.
- · You make inter-state sales.
- · You buy a lot with GST and want input credit.
the verdict
Composition suits small, local B2C businesses; the regular scheme suits B2B sellers and anyone selling across states.
Frequently asked questions
What is the GST composition scheme turnover limit?
Generally ₹1.5 crore for goods and restaurants (₹75 lakh in some special category states) and ₹50 lakh for service providers.
Can composition dealers claim input tax credit?
No. That's the main trade-off for the low rate.
Can a composition dealer sell online?
There are restrictions on certain e-commerce and inter-state supplies; check current rules before opting in.
GST rules change frequently — confirm current limits and rates with a tax professional or the GST portal.