Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
The flat rates
The composition scheme replaces normal GST with a flat rate on turnover: roughly 1% for traders and manufacturers (split CGST/SGST), 5% for restaurants not serving alcohol, and a 6% special rate for small service providers who opt in. Confirm the current rates and the service-composition turnover cap.
The trade-off
The rate is low, but composition has strings: you cannot charge GST on your invoices (you issue a bill of supply), you cannot claim ITC on purchases, and you generally can’t make inter-state sales. So the flat tax comes out of your margin, which suits B2C businesses but rarely B2B ones.
A worked example
Example: a trader with ₹80 lakh turnover under composition pays about ₹80,000 (1%) for the year — simple and cheap — but cannot pass on or reclaim any GST. A regular registration might let them claim ITC and bill GST to business customers, which could work out better if their buyers want ITC. Eligibility caps apply. Our team can compare the two for you.