The Regular Scheme and Composition Scheme under the Goods and Services Tax (GST) in India cater to different types of businesses based on turnover and compliance preferences. Here’s a detailed comparison to help you understand the differences:

1. Applicability

• Regular Scheme:
  Applicable to all taxable persons under GST, with no turnover limit restrictions.
  Mandatory for businesses exceeding the threshold turnover for GST registration.

• Composition Scheme:
  Applicable to small businesses with an aggregate turnover of up to ₹1.5 crore (₹75 lakh for special category states).
  Not available for certain businesses, such as e-commerce operators and service providers (except specified ones).

2. Tax Rate

• Regular Scheme:
  Tax rates vary based on goods or services supplied (e.g., 5%, 12%, 18%, 28%).

• Composition Scheme:
  Fixed lower tax rates:

  • Manufacturers and traders: 1% of turnover.
  • Restaurants: 5% of turnover.
  • Service providers (specific cases): 6% of turnover.

3. Input Tax Credit (ITC)

• Regular Scheme:
  Eligible to claim Input Tax Credit (ITC) on GST paid on purchases.

• Composition Scheme:
  Not eligible to claim ITC.

4. Filing of Returns

• Regular Scheme:

  • Monthly returns: GSTR-1 and GSTR-3B.
  • Annual return: GSTR-9 (optional for small taxpayers).

• Composition Scheme:

  • Quarterly return: CMP-08 (self-assessed tax).
  • Annual return: GSTR-4.

5. Billing

• Regular Scheme:

  • Issues a Tax Invoice with GST charged separately.
  • GST collected is shown explicitly.

• Composition Scheme:

  • Issues a Bill of Supply (no GST charged on the invoice).
  • Cannot collect GST from customers.

6. Compliance

• Regular Scheme:

  • Higher compliance requirements (monthly returns, ITC reconciliation).
  • Suitable for businesses that deal with large clients or are in the supply chain.

• Composition Scheme:

  • Simplified compliance with fewer returns.
  • Best for small businesses with local operations.

7. Eligibility

• Regular Scheme:
  No restrictions based on turnover or type of business.

• Composition Scheme:

  • Turnover limit: ₹1.5 crore (₹75 lakh for some states).
  • Ineligible for businesses dealing in interstate supplies, e-commerce, or non-taxable goods/services.

8. Restrictions

• Regular Scheme:
  No major restrictions, but requires detailed compliance.

• Composition Scheme:

  • Cannot engage in interstate supply.
  • Cannot supply exempt goods or services.
  • Cannot claim ITC.
  • Cannot collect GST from customers.

9. Suitable For

• Regular Scheme:

  • Businesses involved in interstate trade.
  • Businesses dealing with B2B customers who prefer GST input credit.
  • Businesses with high turnover and complex supply chains.

• Composition Scheme:

  • Small businesses with low turnover.
  • Local retailers, traders, or service providers catering to end consumers.
  • Businesses seeking ease of compliance.

Which is Best for You?

• Choose Regular Scheme if:

  • You have a higher turnover or interstate business.
  • You want to claim ITC or deal with B2B clients.

• Choose Composition Scheme if:

  • You are a small business focused on local sales.
  • You want simplified compliance and are not concerned about ITC.

Prepared by:

Naufal Nazar

Auditor & Secretarial

Picco Advisory