The advantages of availing GST Composition Scheme are highly valuable for small businesses in India. This scheme helps reduce compliance, lowers tax rates, and improves liquidity. As a result, it is one of the most popular options for traders, manufacturers, and small service providers who want to simplify their tax obligations.
Reduced Compliance Burden – A Key Advantage of Availing GST Composition Scheme
One of the main advantages of availing GST Composition Scheme is fewer compliance requirements. Unlike regular dealers who must file monthly returns, composition dealers only submit quarterly returns (CMP-08) and one annual return (GSTR-4). Therefore, businesses save time, reduce effort, and focus more on operations.
Lower Tax Rates Under GST Composition Scheme
Another important advantage of availing GST Composition Scheme is lower tax liability. Dealers pay tax at a fixed rate between 1% and 6%, depending on their business type.
| Business Type | Composition Tax Rate |
|---|---|
| Manufacturers & Traders | 1% (0.5% CGST + 0.5% SGST) |
| Restaurants (Non-alcoholic supply) | 5% |
| Service Providers (Special cases) | 6% |
Because rates remain predictable, businesses can plan their finances better and remain competitive in the market.
Ease of Doing Business Through GST Composition Scheme
The advantages of availing GST Composition Scheme also include simple invoicing. Dealers issue a bill of supply instead of a tax invoice, which makes billing easy. Moreover, this process improves transparency with customers while reducing paperwork for business owners.
Better Liquidity and Working Capital Benefits
By paying lower taxes, small businesses can retain more working capital. This advantage of availing GST Composition Scheme ensures better liquidity. Consequently, traders and manufacturers manage daily operations more smoothly without unnecessary financial stress.
Suitable for Small Businesses
The scheme is open for businesses with turnover up to ₹1.5 crore (₹75 lakh in some states). Hence, the advantages of availing GST Composition Scheme are ideal for small shops, traders, and restaurant owners who want hassle-free compliance.
Conclusion
The advantages of availing GST Composition Scheme include lower tax rates, simple compliance, and improved liquidity. However, businesses must also remember that they cannot claim Input Tax Credit or make inter-state sales under this scheme.
👉 Want to know if your business qualifies? Book a free consultation with HelpTax.in today.