--- title: "Benefits of Registering Under GST Composition Scheme | Busy" description: "Simplify your GST compliance with the Composition Scheme. Learn its benefits and save time with Busy. Perfect for small businesses seeking lower taxes and ease!" canonical: "https://busy.in/gst/benefits-of-registering-under-gst-composition-scheme/" author: "Jagdish Prasad" published: "2023-02-20T03:30:00.000Z" category: "GST" --- - The GST Composition Scheme offers lower tax rates for small businesses, reducing their tax liability. - Businesses in the scheme file quarterly returns, easing the compliance burden compared to monthly filings. - The scheme simplifies tax processes, benefiting small businesses with limited resources. - Businesses under the scheme enjoy higher liquidity by not needing detailed purchase and sales records. - The scheme has limitations, like restrictions on interstate sales and no input tax credits. # Benefits Of Registering Under the GST Composition Scheme Provisions for a taxpayer’s registration under the composition system are found in Section 10 of the GST Act. The composition scheme aims to ease low-revenue entities’ compliance requirements for taxpayers with an annual revenue of less than Rs 1.0 crore. A composition dealer may supply services up to 10% of sales or Rs.5 lakhs under the CGST (Amendment) Act, 2018. ## Benefits of Registering under the GST Composition Scheme Registering under the composition scheme can have several benefits for small businesses: 1. **Lower Tax Liability:** Businesses registered under the composition scheme pay a lower rate of tax compared to regular taxpayers. For example, under [**GST**](https://busy.in/gst/) , businesses registered under the composition scheme have to pay a flat rate of tax, which is generally lower than the normal GST rate. 2. **Reduced Compliance Burden:** Businesses registered under the composition scheme have to file quarterly returns instead of monthly returns, which reduces the compliance burden on small businesses. 3. **Easier Process:** The composition scheme has a simpler process for calculating and paying taxes, which can be beneficial for small businesses with limited resources. 4. **Higher Liquidity:** Businesses registered under the composition scheme are not required to maintain detailed records of their purchases and sales, which can increase their liquidity. However, it is important to note that there are certain limitations to the composition scheme, such as restrictions on interstate sales and the inability to claim [**input tax credits**](https://busy.in/gst/input-tax-credit/) . Therefore, businesses should carefully evaluate their eligibility and assess whether registering under the composition scheme is the right decision for them. **Get a Free Trial –** [**Best Accounting Software For SMEs**](https://busy.in/accounting-software/) ## Conclusion Registering under the composition scheme provides severa benefits for small businesses, including lower tax liability, reduced compliance burden, easier tax calculation process, and higher liquidity. However, businesses must carefully consider the limitations of the scheme, such as restrictions on interstate sales and the inability to claim input tax credits, before deciding whether to register. Overall, the composition scheme is an useful option fro small businesses looking to ease their tax compliance process and reduce tax liability. ## About the author **Jagdish Prasad** Jagdish Prasad is a Chartered Accountant with over 5 years of experience. He helps people and businesses with GST, income tax, and HSN codes. Jagdish makes sure his clients follow all tax rules and save money the right way. He also enjoys writing simple articles to help others understand taxes and stay updated with the latest rules. ## Frequently asked questions ### Is the composition scheme suitable for a low-margin business? Not necessarily. Composition tax is calculated on turnover rather than profit. A business may therefore owe tax even when its profit margin is low or it makes a loss. The loss of input tax credit can further increase the effective cost. ### Can a composition taxpayer sell to GST-registered businesses? Yes, provided the sale meets all other conditions of the scheme. However, the buyer cannot claim [**input tax credit**](https://busy.in/gst/input-tax-credit/) because the composition taxpayer cannot charge GST separately and must issue a bill of supply. ### Does the e-way bill requirement apply to composition taxpayers? Yes. Composition status does not remove the [**e-way bill**](https://busy.in/gst/e-way-bill/) requirement. An e-way bill must be generated when the movement of goods falls within the conditions prescribed under Rule 138, subject to the applicable exemptions. ### Does e-invoicing apply to composition taxpayers? No. Composition taxpayers issue bills of supply rather than tax invoices. The e-invoice system accepts suppliers registered as regular taxpayers, SEZ developers, or casual taxable persons, not composition taxpayers. ### Can a taxpayer voluntarily leave the composition scheme? Yes. A taxpayer may voluntarily withdraw from the scheme by filing Form GST CMP-04 on the GST portal. From the effective date of withdrawal, the business must follow the regular [**GST invoicing**](https://busy.in/gst/a-guide-to-invoicing-under-gst/) , tax payment, and return-filing requirements. ### Can a composition taxpayer transfer stock to a branch in another state? No. GST registrations in different states are treated as distinct persons. A stock transfer between them is treated as an inter-state supply even when no payment is involved. Since composition taxpayers cannot make inter-state outward supplies, such a transfer would make the taxpayer ineligible for the scheme. ### Can composition tax be paid using input tax credit? No. A composition taxpayer cannot claim or use input tax credit. The composition tax liability must therefore be paid through the electronic cash ledger. ## Related articles - [Regular Dealer Monthly GST Checklist for 2026](https://busy.in/gst/regular-dealer-monthly-gst-checklist-for-2026/) - [Composition Scheme Invoice Mistakes: 7 Billing Errors and How to Fix Them](https://busy.in/gst/composition-scheme-invoice-mistakes-7-billing-errors-and-how-to-fix-them/) - [GST Composition Scheme](https://busy.in/gst/gst-composition-scheme-2/) - [Composition Scheme Under GST: Eligibility, Rates, Returns, and 2026 Rules](https://busy.in/gst/composition-scheme-under-gst-explained/) - [What Goods and Services Are Not Eligible for the GST Composition Scheme?](https://busy.in/gst/what-goods-and-services-are-not-eligible-for-the-gst-composition-scheme/) - [GST Composition Scheme Rules for E-commerce Sellers and Online Retailers](https://busy.in/gst/gst-composition-scheme-rules-for-e-commerce-sellers-and-online-retailers/) - [Impact of the GST Composition Scheme on Startups and MSMEs](https://busy.in/gst/impact-of-the-gst-composition-scheme-on-startups-and-msmes/) - [How to Opt-Out of the Composition Scheme?](https://busy.in/gst/how-to-opt-out-of-the-composition-scheme/) - [Complete Guide to GST Composition Scheme (Updated 2026)](https://busy.in/gst/complete-guide-to-gst-composition-scheme/) - [What are GST Composition Scheme Rules?](https://busy.in/gst/what-are-composition-scheme-rules-under-gst/)