When a business registers under GST, it can choose between becoming a normal dealer or a composition dealer. Both options have unique rules, tax rates, and compliance requirements.
Understanding the difference between normal dealer and composition dealer is important. It helps small business owners decide which scheme suits their needs better.
Who is a Normal Dealer Under GST?
A normal dealer is a taxpayer registered under the regular GST system. They must:
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Charge GST on sales.
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Collect Input Tax Credit (ITC) for purchases.
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File monthly returns.
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Maintain detailed invoices and records.
👉 Example: A wholesaler selling goods across India is usually a normal dealer.
Who is a Composition Dealer Under GST?
A composition dealer opts for the simplified Scheme. Instead of standard tax rates, they:
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Pay a fixed tax percentage of their turnover.
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Cannot claim Input Tax Credit (ITC).
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File quarterly returns, not monthly.
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Cannot collect GST from customers separately.
👉 Example: A small retailer with annual turnover below ₹1.5 crore may choose to become of it.
🔎 Key Differences Between Normal Dealer and Composition Dealer
| Feature | Normal Dealer | Composition Dealer |
|---|---|---|
| Tax Rate | Regular GST rates (5%, 12%, 18%, 28%) | Fixed rate (1%, 5%, 6% depending on category) |
| Input Tax Credit (ITC) | Available | Not available |
| Invoice | Issues tax invoice (with GST) | Issues bill of supply (without GST) |
| Compliance | High – monthly returns | Low – quarterly returns |
| Eligibility | Any turnover | Turnover ≤ ₹1.5 crore (₹75 lakh in some states) |
| Inter-State Sales | Allowed | Not allowed |
| Customer Base | Larger businesses & interstate trade | Local customers only |
Benefits of Normal Dealer
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Access to ITC, which reduces tax burden.
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Eligible for interstate trade.
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Can grow without turnover restrictions.
Benefits of this scheme.
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Lower tax rates reduce costs.
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Simple compliance with less paperwork.
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Quarterly filing saves time and effort.
Which Option Should You Choose?
The choice depends on business size and operations:
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If your turnover is small and mostly local, the composition scheme reduces compliance.
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If your business is growing, interstate, or B2B, becoming a normal dealer is better because you can claim ITC and issue tax invoices.
👉 Need expert advice? Book a free GST consultation, Contact us and we’ll guide you in making the right decision.