GST: Regular Scheme vs Composition Scheme — Which Should You Choose?

1Quick verdict

Sell mostly to end-consumers (B2C), have a small turnover and want minimal paperwork? The composition scheme is simpler and cheaper. Sell B2B, want to pass on and claim input tax credit (ITC), or supply inter-state? The regular scheme is the right fit.

2Rate & input tax credit

Under the regular scheme you charge GST at the applicable rate (5/12/18/28%) and can claim ITC on your purchases. Under the composition scheme you pay a small flat percentage of turnover (for example, around 1% for traders/manufacturers and 5% for restaurants — verify current rates), you cannot charge GST on the invoice, and you cannot claim ITC.

3Eligibility & limits

The composition scheme is for small taxpayers within the notified aggregate-turnover limit (broadly up to ₹1.5 crore for goods, with a lower limit for special-category states, and a separate scheme for small service providers). You generally cannot opt for composition if you make inter-state outward supplies or supply through an e-commerce operator that collects TCS. Always confirm the current thresholds before opting in.

4Returns & paperwork

• Regular scheme: GSTR-1 (outward supplies) and GSTR-3B, usually monthly (or quarterly under QRMP), plus the annual return.
• Composition scheme: a simple quarterly payment statement in CMP-08 and an annual return in GSTR-4 — far less paperwork.

5The catch with composition

Because you cannot claim ITC and cannot charge GST separately, the tax becomes your cost. Your B2B customers also cannot take credit from you, which can make you less attractive to business buyers. For B2C businesses with mostly local sales, that trade-off is often worth the simplicity.