The GST Composition Scheme for Shops: Is It Right for You?

The composition scheme is a simpler way for small businesses to pay GST. Instead of charging GST on every sale and claiming credit on purchases, a composition shop pays a small fixed percentage of its turnover. It suits many small shops, but not all. This is general guidance with the limits as commonly stated; confirm the current figures and your own case with your CA.

Who can choose it

• Businesses selling goods with a turnover up to ₹1.5 crore a year (₹75 lakh in some special category states).
• Not for businesses selling across state lines, or for a few categories that are excluded.

What you pay

A trader on the scheme generally pays 1% of turnover (0.5% CGST and 0.5% SGST), from the shop’s own money: you cannot collect GST from customers.

What changes on your bills

You issue a bill of supply, not a tax invoice, with no GST shown on it and the words that you are a composition taxable person, not eligible to collect tax on supplies. Your customers cannot claim input credit on what they buy from you.

What you file

• CMP-08 every quarter, with the tax.
• GSTR-4 once a year.

That is less than a regular taxpayer’s monthly GSTR-1 and GSTR-3B.

What you give up

• No input tax credit on your purchases: the GST you pay suppliers is a cost.
• No sales to other states.
• Business buyers may prefer a supplier who gives a tax invoice, since they can claim the credit.

When it usually suits a shop

A small shop selling mostly to the public, within its own state, on modest margins, often finds the scheme simpler and cheaper. A shop selling a lot to registered businesses, or buying in a lot of GST it could claim back, often does better as a regular taxpayer. Run both on last year’s numbers with your CA before deciding.

QuickBills and composition

QuickBills Pro prepares and files GSTR-1 and GSTR-3B for regular taxpayers. Composition returns (CMP-08 and GSTR-4) are not filed from QuickBills yet, though your sales record in QuickBills gives your CA the turnover they need.