Composition Scheme
Definition
A simplified GST scheme for small businesses with turnover up to ₹1.5 Crore (goods) or ₹50 Lakh (services). Offers lower flat tax rates (1-6%) and quarterly filing. Cannot claim ITC or sell inter-state under this scheme.
Why is Composition Scheme Important?
Navigating the Indian tax system requires a clear understanding of terms like Composition Scheme. With the introduction of the new income tax regime alongside the old one, taxpayers must evaluate their deductions, exemptions, and tax brackets carefully. This concept is a key component in optimizing your tax liabilities under the Income Tax Act and GST framework.
Proper tax planning using this metric can help individuals and businesses maximize their take-home income while remaining fully compliant with government regulations. We provide free tax calculators to help you estimate these figures accurately and make informed decisions before filing your returns.
What is the GST Composition Scheme?
The Composition Scheme is a simplified GST compliance option for small businesses. Instead of filing detailed monthly returns, eligible businesses pay a fixed percentage of turnover as tax and file quarterly returns.
Composition Scheme Rates
| Business Type | Composition Rate | Turnover Limit |
|---|---|---|
| Manufacturers | 1% (0.5% CGST + 0.5% SGST) | Up to ₹1.5 crore |
| Traders | 1% | Up to ₹1.5 crore |
| Restaurants | 5% | Up to ₹1.5 crore |
| Service Providers | 6% | Up to ₹50 lakh |
Key Restrictions
- Cannot collect GST from customers (tax is borne by the dealer)
- Cannot claim Input Tax Credit
- Cannot make inter-state supply of goods
- Cannot supply through e-commerce operators
- Must mention "Composition Taxable Person" on every bill