← GST Advisory

Composition Scheme
Strategy & Optimization

For businesses under ₹1.5 Cr, composition scheme can reduce effective GST rate by 40-60% and cut compliance burden by 90%. But it's not right for everyone. Strategic analysis determines if it creates value.

Ideal for: Small businesses, retailers, restaurants, service providers under ₹1.5 Cr

40-60%
Effective Rate Reduction
90%
Compliance Time Saved
Quarterly
Filing vs Monthly

The Composition Decision: It's Not Simple

Most accountants say "go for it" or "avoid it"—neither is always true. The right answer requires YOUR specific numbers.

Myth 1

"Composition is always simpler and cheaper"

Reality: You lose ALL input tax credit. If high input costs, composition can COST you money.

Myth 2

"If you're B2B, composition never works"

Reality: Many B2B customers don't actually need your ITC. We've helped B2B providers save ₹3-8L by switching.

Fact 1

Each GSTIN is evaluated separately

Restaurant chain with 4 locations, each under ₹1.2 Cr? All 4 can use composition.

Fact 2

You can switch once per year (at FY start)

Not locked in forever. Apply by March 31 for next FY transition.

Composition Scheme Rates

1%
Manufacturers
CGST 0.5% + SGST 0.5%
5%
Restaurants
(Not serving alcohol)
1%
Traders
Other suppliers
6%
Service Providers
CGST 3% + SGST 3%

Eligibility:

  • Turnover under ₹1.5 Cr
  • Only intra-state sales
  • Can't sell through e-commerce (except restaurants)
  • Can't do inter-state sales
Case Study

Boutique Saves ₹4.2L Annually

Before (Regular Scheme)

  • • Revenue: ₹95L
  • • Net GST outflow: ₹4.8L
  • • Effective rate: 5%
  • • Compliance: 25 hrs/month
  • • CA fees: ₹48K/year

After (Composition)

  • • Net GST outflow: ₹95K
  • • Effective rate: 1%
  • • Compliance: 2 hrs/quarter
  • • CA fees: ₹12K/year
  • • Savings: ₹4.21L
₹4.21L
Annual Savings
225 hrs
Time Saved/Year
85%
Filing Reduction

"The ₹4.2 Lakhs savings is great. But getting 225 hours of my life back is LIFE-CHANGING. I'm designing again, not drowning in GST compliance."

— Boutique Owner

Questions & Answers

Composition Scheme FAQs

Expert answers on eligibility, ITC implications, and savings potential

No. Zero ITC under composition. All GST on purchases becomes cost.

This is why composition works best for:

  • ✓ B2C businesses with low input costs
  • ✓ Service providers (labor-intensive, not material-intensive)
  • ✓ Retailers with low margins on GST-exempt goods

Sami Tax models the ITC loss vs composition savings to give you the true answer.

Under composition, you CANNOT make inter-state sales.

Options available:

1.Decline orders: If inter-state volume is minimal
2.Use marketplace: Route through aggregator platform
3.Separate entity: Create regular-scheme entity for inter-state
4.Switch schemes: Apply by March 31 for next FY transition

Documentation differences:

Regular Scheme

Tax Invoice with GST line items

Composition Scheme

"Bill of Supply" - no GST shown

B2C customers often prefer cleaner pricing without separate GST line. B2B customers who need ITC will know.

Real savings depend on your business type:

18% → 1%

Traders (17% savings)

18% → 6%

Service providers (12% savings)

5% → 5%

Restaurants (similar)

12-18% → 1%

Manufacturers

Plus: 90% compliance time reduction + 75% lower CA fees.

Find Out If Composition Works for You

45-minute analysis: Eligibility, financial modeling, customer impact, clear recommendation.

If composition doesn't save you money, we'll tell you honestly.