Small Business & MSME GST Optimization
GST Composition Scheme vs Regular Scheme Calculator
Evaluate statutory eligibility under Section 10 & 10(2A) and compare net financial profit, sunk input tax credit, and compliance overhead between Composition and Regular Scheme.
1. Business Profile & Turnover
Activity type and sales volume for statutory threshold evaluation.
Total gross turnover from supplies within the State.
B2B buyers lose ITC if you choose Composition Scheme.
2. Input Costs & Pricing Model
Purchases, input GST rates, and price pass-through structure.
Excluding taxes; goods/materials bought for trade or manufacture.
3. Statutory Ineligibility Checks
Mandatory conditions under Section 10(2) of the CGST Act.
Scheme Recommendation & Verdict
- Annual Financial Advantage
- ₹8,48,000.00 / year
- Net Retained Profit (Composition)
- ₹6,22,000.00 (10.37%)
- Net Retained Profit (Regular)
- ₹14,70,000.00 (24.5%)
Strategic Advisory Note
Regular Scheme is financially superior by ₹848000/year. The Input Tax Credit (ITC) of ₹810000 on your purchases easily exceeds the flat composition tax and regular compliance costs, eliminating the sunk tax penalty of composition.
Side-by-Side Financial Comparison
Comprehensive financial and compliance audit between Section 10 Composition Scheme and Regular GST Scheme.
| Financial & Statutory Metric | Composition Scheme (Section 10) | Regular Scheme |
|---|---|---|
| Applicable GST Rate on Sales | 1% flat turnover tax | 18% (collected from buyer) |
| Tax Remitted on Turnover | ₹60,000.00 | ₹10,80,000.00 |
| Input Tax Credit (ITC) on Purchases | ₹0.00 (FORFEITED — Sunk Cost) | ₹8,10,000.00 (100% Claimable) |
| Sunk Uncredited Purchase GST | ₹8,10,000.00 | ₹0.00 (Fully offset against output tax) |
| Net GST Paid to Government | ₹60,000.00 | ₹2,70,000.00 |
| Annual Compliance & Accounting Overhead | ₹8,000.00 (4 CMP-08 + GSTR-4) | ₹30,000.00 (24+ returns, 2B audit) |
| Invoice Issued to Customers | Bill of Supply (No GST charged) | Tax Invoice (With GST & HSN codes) |
| B2B Customer ITC Advantage | Buyers lose ₹0.00 ITC | Buyers get ₹0.00 ITC |
| Net Retained Profit (Bottom Line) | ₹6,22,000.00 | ₹14,70,000.00 |
Frequently asked questions
What is the turnover limit for the GST Composition Scheme in 2026?
The annual aggregate turnover limit is ₹1.50 Crore in the preceding financial year for manufacturers and traders of goods in standard states. For 8 Special Category States (Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, and Uttarakhand), the limit is ₹75 Lakhs. For standalone service providers and mixed suppliers under Section 10(2A), the threshold is ₹50 Lakhs.
Can a Composition dealer charge GST or issue a Tax Invoice?
No. Under Section 10(4) of the CGST Act, a composition taxpayer is strictly prohibited from collecting any GST from the recipient. Instead of a Tax Invoice, the dealer must issue a 'Bill of Supply' containing the mandatory statutory declaration: 'Composition taxable person, not eligible to collect tax on supplies.'
What happens to the GST paid on purchases under the Composition Scheme?
Under Section 10(4), a composition taxpayer cannot claim any Input Tax Credit (ITC). Any GST paid on purchases of trading inventory, raw materials, capital machinery, freight, or office rent becomes an unrecoverable sunk cost added directly to business expenditure.
Why do B2B corporate buyers often avoid buying from Composition dealers?
Because a composition dealer issues a Bill of Supply rather than a Tax Invoice, the purchasing business cannot claim any Input Tax Credit (ITC) on that transaction. For a GST-registered B2B buyer, buying from a composition dealer effectively makes goods 5% to 18% more expensive compared to buying from a regular supplier who provides a tax invoice with full ITC pass-through.
Can a composition taxpayer sell goods to customers in other states?
No. Under Section 10(2)(c) of the CGST Act, making even a single inter-State outward supply of goods or services immediately and automatically revokes eligibility for the Composition Scheme, requiring the taxpayer to transition into the Regular Scheme.
What is the compliance cost difference between Composition and Regular schemes?
Composition dealers file only 4 quarterly self-assessed challans in Form CMP-08 and 1 annual return in Form GSTR-4 (typically costing ₹6,000 - ₹12,000/year in accounting fees). Regular taxpayers must file monthly GSTR-1, monthly GSTR-3B, reconcile vendor invoices against GSTR-2B, and file GSTR-9/9C annually (typically costing ₹25,000 - ₹60,000/year in professional compliance fees).