The composition scheme, explained simply

The composition scheme is a simpler GST option for eligible small taxpayers. Instead of normal GST collection and full return filing, you pay tax at a fixed lower rate on turnover and follow a lighter compliance path.

Who usually considers it

Small traders, manufacturers and some restaurants with turnover within the notified limit often look at composition because it is easier to run than the regular scheme.

What you give up

• You generally cannot collect normal GST from customers.
• You cannot claim input tax credit on your purchases.
• You cannot issue a tax invoice; you issue a bill of supply instead.
• Inter-state outward supplies are restricted.

When it works

It works best when your customers are end consumers, your margins are decent, and your input credit is not a big part of your economics. If your customers are GST-registered businesses, many of them prefer suppliers on the regular scheme because they want input credit.