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Composition Scheme v/s Regular Scheme under GST

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Sakshi Shah

Aggregate Turnover
Composition Scheme
GST
GSTR-4
Last updated on April 19th, 2021

When the Aggregate Turnover of a business exceeds the threshold limit of registration under GST, they need to take Compulsory Registration. Such business can take benefit of the Composition Scheme under GST. It is a voluntary scheme under which there is less compliance. 

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Take help of an expert to apply for registration under Composition Scheme of GST
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It is important to note that a business must fulfill certain conditions to take benefit of the Composition Scheme. If the taxpayer fulfills the conditions, he/she is eligible to apply for registration under the Composition Scheme on GST Portal.

GST Composition Scheme v/s GST Regular Scheme

To analyse whether a business should register under the composition scheme or not, the following factors should be considered: 

  Opt for GST Composition Scheme Opt for GST Regular Scheme
Nature of Customers Goods or services are supplied to unregistered dealers or composite dealers who are not ready to pay GST Goods or services are supplied to registered dealers who are ready to pay GST
Claim Input Tax Credit The taxpayer does not wish to claim input tax credit since the majority of purchase is from unregistered dealers or composite dealers  Taxpayer wishes to claim the input tax credit of GST paid on purchases from registered dealers
Type of Sales Business making only Intra-state sales of goods i.e. sales within the state of registration Business making Inter-state sales of goods i.e. sales outside the state of registration and exports of goods
Goods or Services Taxpayer dealing in the sale of taxable goods or taxable services  Taxpayer dealing in the sale of non-taxable goods or non-taxable services
Record Keeping Business wants to avoid record-keeping and accounting  Business can maintain accounting and record-keeping  
E-Commerce Sales A taxpayer has no plans to sell goods or services online through an e-commerce portal  Taxpayer plans to sell goods or services online through an e-commerce portal  

FAQs

What is the tax rate for taxpayer under Composition Scheme?

a. Trader of Goods = 1% ( CGST 0.5% & SGST 0.5%)
b. Manufacturer of Goods = 2% (CGST 1% & SGST 1%)
c. Restaurant Services = 5% (CGST 2.5% & SGST 2.5%)
d. Other Services = 6% (CGST 3% & SGST 3%)

I am an ice cream manufacturer with sales in one state only. Can I register under Composition Scheme?

No. The following type of persons cannot register under Composition Scheme of GST:
– Ice cream and other edible ice, whether or not containing cocoa
– Pan masala
– All goods i.e. tobacco and manufactured tobacco substitutes

Can I register under Regular Scheme now and later opt for Composition Scheme under GST?

The taxpayer has an option to opt in or opt out of Composition Scheme at the beginning of each financial year. Thus, you can register under regular scheme now and later opt in for Composition Scheme provided you are elegible to take benefit of Composition Scheme. However, this option cannot be availed in the middle of a financial year.

Got Questions? Ask Away!

  1. Hey @Shweta_Saini

    You can opt out of Composition Scheme from your account on GST Portal. Once the taxpayer type is updated to Regular in your profile, you can start filing GST Returns under the regular scheme. If you are facing any issues while making the withdrawal application, you can create a grievance on the GST Portal.

    Do let us know if you have any further queries.

  2. I want to be able to claim input tax credit for GST paid. Should I opt for the GST composition scheme or regular scheme?

  3. Hey @Joe_Fernandes

    If you wish you claim Input tax credit, you should opt for GST Regular Scheme.

    Read more about the difference here.