While the GST Composition Scheme has several advantages for small businesses, it also has some disadvantages that businesses should be aware of:
- Restriction on interstate sales: Businesses registered under the Composition Scheme cannot make interstate sales, which may limit their market reach.
- Limited input tax credit: Businesses under the Composition Scheme cannot claim input tax credit on purchases, which may increase their costs.
- Limited ability to increase prices: Since businesses under the Composition Scheme cannot claim input tax credit, they may have limited ability to increase prices to pass on any increase in costs.
- Cap on turnover: The Composition Scheme is available only for businesses with an annual turnover of up to Rs. 1.5 crore, which may exclude larger businesses that may also have limited resources.
- Penalty for non-compliance: Any non-compliance with the provisions of the Composition Scheme may attract penalty under the GST law, which may add to the cost of doing business.
It is important for businesses to carefully evaluate the advantages and disadvantages of the Composition Scheme before opting for it, as it may not be suitable for all businesses.
