# GST vs Composition Scheme Comparator

> The composition scheme lets small businesses pay GST as a flat percentage of turnover — 1% for traders and manufacturers, 5% for restaurants and 6% for service providers — with quarterly payments and an annual return. In exchange they can't charge GST on invoices, can't claim input tax credit and can't make inter-state sales. It suits B2C businesses with low input costs.

Interactive calculator: https://www.industax.com/calculators/gst-composition-comparator

- **Traders & manufacturers:** 1% of turnover
- **Restaurants:** 5% of turnover
- **Service providers:** 6% (up to ₹50 lakh)

## Composition scheme at a glance

| Feature | Composition | Regular |
| --- | --- | --- |
| Turnover limit | ₹1.5 crore (₹75 lakh in some states); ₹50 lakh for services | None |
| Tax rate | 1% / 5% / 6% of turnover | Rate on each supply |
| Input tax credit | Not available | Available |
| Charge GST on invoice | No — issue a bill of supply | Yes |
| Inter-state outward sales | Not allowed | Allowed |
| Returns | CMP-08 quarterly; GSTR-4 annually | GSTR-1 and GSTR-3B (monthly or QRMP) |

## Who can't opt for composition

- Suppliers of most services above ₹50 lakh
- Manufacturers of ice cream, pan masala and tobacco products
- Inter-state suppliers and casual or non-resident taxable persons
- Suppliers through e-commerce operators who collect TCS, except under the relief for small intra-state goods sellers

## Worked example: retail trader with ₹80 lakh turnover

1. Composition: 1% of ₹80 lakh = ₹80,000 a year, no ITC.
2. Regular: output GST at 18% on a ₹10 lakh margin over purchases ≈ ₹1.8 lakh net after ITC (if all sales are at 18%).
3. But under the regular scheme B2B buyers can claim ITC, and prices can be quoted plus GST.

**Result:** Composition is cheaper for this B2C trader; a B2B trader would usually prefer the regular scheme.

## FAQs

### Can a composition dealer sell to other businesses?

Yes, but the buyer can't claim input tax credit because no GST is charged on the bill of supply, which makes composition dealers less attractive to B2B customers.

### Can I switch from composition to regular mid-year?

Yes, by filing an intimation; you must also switch if turnover crosses the limit. You can claim ITC on stock held on the date of switching, subject to conditions.

### Is the 1% composition tax on total turnover or taxable turnover?

For traders it is on turnover of taxable supplies; for manufacturers and others it is on total turnover in the state.

## Official sources

- GST portal: https://www.gst.gov.in/
- CBIC — GST rates and notifications: https://cbic-gst.gov.in/

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This is general information, not advice for your specific facts.