GST Registration
Composition Scheme Explained: Is It Right for You?
Last Reviewed: 28 July 2026
Reviewed by: IndiaBusiness.ai Editorial
Quick Answer
If you sell only within your state, have turnover under ₹1.5 crore, and don't need to claim input tax credit, the Composition Scheme trades a lower, flat tax rate for much simpler quarterly filing — but you give up ITC and the ability to sell interstate or on most marketplaces.
Composition vs Regular GST
| Feature | Composition | Regular |
|---|---|---|
| Tax rate | Flat 1–5% | Standard slab rates |
| Input tax credit | Not available | Available |
| Interstate sales | Not allowed | Allowed |
| Marketplace selling | Generally not allowed | Allowed |
| Filing | Quarterly | Monthly |
The Composition Scheme is GST's simplified track: a flat tax rate (typically 1% for traders/manufacturers, 5% for restaurants, versus the standard rates under Regular GST) and quarterly returns instead of monthly ones. It's designed for small businesses that find full GST compliance disproportionate to their size.
The tradeoffs are real, not cosmetic. You can't claim input tax credit on what you purchase, you can't sell across state lines, and most marketplaces won't onboard a Composition Scheme seller at all — Amazon and Flipkart generally require Regular GST. You also can't issue a tax invoice showing GST separately, which matters if your customers are businesses claiming their own ITC.
It's the right call for a genuinely local business — a single-state retailer, a small restaurant, a service provider with local clients only — where the compliance savings outweigh the restrictions. The moment marketplace selling or interstate expansion is even a near-term plan, Regular GST is the better starting point.