GST Composition Scheme: Is It Right for Your Business?
Need help with gst? We can handle it for you.
The composition scheme sounds like a straightforward win when you first hear about it: pay a lower flat rate, skip most of the paperwork. The part that gets left out of that pitch is what you give up to get there.
The GST composition scheme lets eligible small businesses, turnover up to ₹1.5 crore, or ₹75 lakh in North-Eastern states and Himachal Pradesh, pay GST at a flat, low rate: 1% for traders, 2% for manufacturers, 5% for restaurants, instead of standard GST rates. In exchange, composition taxpayers cannot claim Input Tax Credit, cannot collect GST from customers, and generally cannot make inter-state supplies. The ₹75 lakh figure here is the composition-scheme limit specifically. It is a different number from the GST registration threshold, and mixing the two up is a common mistake. See our disambiguation below.
What the composition scheme is
Composition levy, under section 10 of the CGST Act, is an alternative to standard GST. Instead of charging GST on every invoice and claiming Input Tax Credit on your purchases, you pay a flat percentage of turnover to the government directly and skip the invoice-level GST mechanics almost entirely. It's built for small businesses whose margins and paperwork don't justify running the full ITC chain.
Eligibility: the turnover limits
| Category | Turnover limit (preceding FY) |
|---|---|
| General category States/UTs | ₹1.5 crore |
| North-Eastern States and Himachal Pradesh | ₹75 lakh |
| Service providers under the amended composition scheme for services | ₹50 lakh |
That ₹75 lakh figure belongs here, to composition eligibility, and nowhere else. It gets misquoted online as a GST registration threshold for special-category states, which is a different rule entirely with a much lower number. See our if that's the question you actually came here with.
From the blog
Get it done for you
Hand it to BuildWright — we handle the drafting, filing and compliance end to end.
Learn the details
Guides that walk through every step.
Get new templates and compliance updates by email.