Quick Answer: Under the GST Composition Scheme, eligible businesses (turnover up to ₹1.5 crore for traders/manufacturers, ₹50 lakh for service providers) pay a flat GST rate of 1% (traders), 1% (manufacturers), or 6% (service providers) on turnover instead of regular GST filing. Composition dealers cannot charge GST to customers or claim Input Tax Credit.
GST Composition Scheme — Is It Right for Your Business?
The Composition Scheme lets small businesses pay a fixed percentage of turnover as GST instead of the complex input/output mechanism. While it simplifies compliance dramatically, it comes with trade-offs: you cannot claim ITC, cannot issue tax invoices, and cannot make inter-state sales.
Composition Scheme Rates
| Business Type | Turnover Limit | Composition Rate |
|---|---|---|
| Traders (goods) | ₹1.5 Cr | 1% (0.5% CGST + 0.5% SGST) |
| Manufacturers | ₹1.5 Cr | 1% of turnover |
| Restaurants (non-AC, not serving alcohol) | ₹1.5 Cr | 5% of turnover |
| Service providers (CCS) | ₹50 Lakh | 6% of turnover |
Frequently Asked Questions
No. Composition dealers must issue a Bill of Supply (not a tax invoice). Buyers cannot claim ITC from composition dealers, which makes composition less attractive for B2B sales.
Once your turnover exceeds the composition limit, you must switch to the regular scheme from the next financial year. Continuing under composition is illegal and attracts demand and penalties.