The composition scheme in GST is a simplified tax system created for small businesses. It allows them to pay tax at a fixed percentage of turnover instead of calculating GST on every sale. This scheme reduces compliance burden and helps small taxpayers focus more on running their business. But the big question remains: which business can opt for composition scheme?
Eligibility Criteria for Businesses
The GST law clearly defines which business can opt for composition scheme. Below are the main eligibility requirements:
-
Businesses with an annual turnover of ₹1.5 crore or below (₹75 lakh in some states).
-
Manufacturers of goods (except those producing restricted items).
-
Traders dealing in goods.
-
Restaurants (not serving alcohol).
👉 This means that small manufacturers, shopkeepers, and eateries can benefit from the scheme if they fall under the turnover limit.
Ineligible Businesses
While discussing about composition scheme, it is also important to know who cannot opt for it:
-
Service providers (except restaurants).
-
Businesses involved in inter-state supply of goods.
-
E-commerce sellers supplying through platforms like Amazon or Flipkart.
-
Businesses supplying goods that are exempt under GST.
-
Casual taxable persons or non-resident taxable persons.
So, only certain categories of businesses qualify, while others must continue under the normal GST regime.
Tax Rates under the Scheme
Another important aspect of which business can opt for composition scheme is the tax rate applicable.
| Business Type | GST Rate under Composition Scheme |
|---|---|
| Manufacturers & Traders | 1% (0.5% CGST + 0.5% SGST) |
| Restaurants (Non-Alcohol) | 5% (2.5% CGST + 2.5% SGST) |
| Other eligible service providers (if notified) | 6% (3% CGST + 3% SGST) |
These low fixed rates make compliance easier and encourage more small businesses to participate.
Benefits of Opting for the Scheme
Businesses that are eligible enjoy several benefits:
-
Reduced tax rates compared to the regular GST regime.
-
Simple quarterly return filing instead of monthly.
-
Lesser paperwork and compliance stress.
-
Increased focus on business growth.
Thus, understanding which business can opt for composition scheme can help entrepreneurs make informed tax decisions.
Conclusion
The answer to which business can opt for composition scheme lies in turnover limits, business type, and restrictions under GST law. Eligible small manufacturers, traders, and restaurants can save time and reduce compliance hassle. However, service providers (except restaurants) and inter-state suppliers cannot avail it.
👉 Want to check if your business qualifies? Contact HelpTax.in for expert advice and hassle-free compliance.