Guides · GST
The GST composition scheme, explained
The composition scheme is a simpler GST option for eligible small businesses. Instead of the full invoice-level tax and credit machinery, a composition dealer pays tax at a flat rate on turnover and files less often.
What the composition scheme offers
A composition dealer pays GST at a flat, turnover-based rate and files returns less frequently than a regular taxpayer. The appeal is simplicity: less paperwork, and tax worked out on turnover rather than line by line.
Eligibility depends on a turnover limit and the type of business. The scheme is aimed at smaller suppliers, and some categories of business are not allowed to opt in.
The trade-offs
The simplicity has a cost. A composition dealer cannot charge GST separately on the bill, so it issues a bill of supply rather than a tax invoice, and its customers cannot claim input tax credit on the purchase. The dealer itself also cannot claim input tax credit on its own purchases.
For a business that sells mainly to other businesses that want to claim credit, that is a real drawback. For one selling mainly to end consumers, the simpler compliance can outweigh it.
How Lekha handles a bill of supply
A composition dealer bills with a bill of supply, which shows no separate tax. Lekha records what your documents say and tracks the money on both sides, keeping each bill in the two-sided ledger whether or not it carries tax.
Lekha records and tracks; it does not decide your scheme eligibility or file your returns — confirm the current rules with your accountant.
Questions
- What is the GST composition scheme?
- It is a simpler GST option for eligible small businesses that pay tax at a flat turnover-based rate and file less often, in exchange for giving up input tax credit.
- Can a composition dealer charge GST on the bill?
- No. A composition dealer issues a bill of supply and cannot charge GST separately, so its customers cannot claim input tax credit on the purchase.
- Who should consider the composition scheme?
- Smaller businesses selling mainly to end consumers, where lighter compliance matters more than passing on input tax credit. Eligibility depends on turnover and business type.
This guide is general information, not legal or tax advice. Confirm the current rules and your own circumstances for any specific case.