Composition Scheme vs Regular GST: Which Should Your Business Choose?
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The GST composition scheme (s.10, CGST Act) lets eligible small businesses pay a flat 1-5% of turnover instead of standard GST rates, with simpler quarterly returns — general-category businesses qualify up to ₹1.5 crore turnover, North-Eastern states and Himachal Pradesh up to ₹75 lakh, and service providers up to a separate ₹50 lakh limit. The catch: composition taxpayers cannot collect GST from customers or claim input tax credit, and cannot supply across state lines — it suits small, single-state, B2C businesses, and is a poor fit for B2B sellers whose customers want to claim ITC.
Once you're registered for GST — see our guide to the registration threshold if you haven't confirmed you need to register yet — you face a second decision: regular GST, or the composition scheme? Both are legitimate; they suit different businesses. This guide lays out the real trade-off so you can make the call deliberately instead of defaulting into whichever your accountant mentioned first.
What the Composition Scheme Is, and Who's Eligible
Under Section 10 of the CGST Act, eligible small taxpayers can opt to pay GST as a flat percentage of their turnover instead of computing tax at the standard rate on every supply. In exchange for simplicity, composition taxpayers give up two things that matter a lot to certain business models: the ability to collect GST from customers and issue a tax invoice, and the ability to claim input tax credit on their own purchases.
Turnover Eligibility — and the ₹75 Lakh Figure You Need to Disambiguate
| Category | Composition-scheme turnover limit |
|---|---|
| General category (most States/UTs) | ₹1.5 crore |
| North-Eastern states + Himachal Pradesh | ₹75 lakh |
| Service providers (separate composition option) |
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