GST Composition Scheme for Small Business (2026): Is It Right for You?
The composition scheme explained — who is eligible, the flat tax rates, the trade-offs, and how to bill correctly under it.
The composition scheme lets eligible small businesses pay GST at a flat rate on turnover with simpler returns, in exchange for some limitations. Here is how it works and how to decide. This is general information, not tax advice — GST rules, rates and thresholds change and vary by case, so confirm specifics with a qualified professional or the official GST portal.
How the scheme works
You pay a small fixed percentage of turnover instead of regular GST, and file simpler, less frequent returns — attractive for small B2C businesses that want lighter compliance.
The trade-offs
- You cannot collect GST from customers or issue a tax invoice — only a bill of supply
- You cannot claim input tax credit
- You generally cannot make interstate sales or sell on e-commerce
- You must display “composition taxable person” as required
Billing correctly under composition
Composition dealers issue a bill of supply, not a tax invoice. MyGroce can be configured for composition billing so your documents and reports match the scheme’s rules.
Frequently asked questions
Should a small shop opt for the composition scheme?
It suits small B2C businesses wanting simpler compliance, but you lose input credit and cannot sell interstate or online. Weigh it against regular GST for your case, and confirm eligibility.
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