Differences Between Regular and Composite Gst Schemes
Under the Goods and Services Tax (GST) system in India, regular and composite schemes refer to two different methods of tax payment and compliance for businesses. In the regular scheme, companies must maintain detailed records of their transactions, file regular returns, and pay taxes on their output supplies.
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On the other hand, composite scheme taxpayers must pay a fixed tax rate based on their turnover, with reduced compliance requirements.
The key differences between regular and composite schemes under GST include the tax rates, compliance requirements, eligibility criteria, and input tax credit availability. Choosing the appropriate scheme is essential for businesses, as it can impact their tax liability and compliance burden.
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What is the Difference Between a Regular GST Scheme and Composite GST Scheme?
Below is a table comparing the two of them to highlight the differences.
| Particulars | Regular GST Scheme | Composite GST Scheme |
| Meaning | A regular GST scheme is a tax system where a registered taxpayer collects and pays GST on the value of the goods and services supplied. | The Composite GST scheme is designed for small taxpayers with a turnover of up to Rs. 1.5 crores who pay tax at a lower rate and file quarterly returns. |
| Filing Of Returns | The following returns are to be filed: Annual Return: Form GSTR-9 or GSTR-9CMonthly Basis: GSTR 3BMonthly or Quarterly Basis: GSTR-1 | The following returns are to be filed: Annual Return: Form GSTR 4 yearly as decided in the 32nd council meeting.Monthly Basis: Form GST-9A for Annual ReturnStatement of tax paid on Quarterly Basis: Form CMP-08 |
| Supply | Supply can be made interstate and intrastate under the standard GST scheme. | The supply can only be made within an intra-state under the composite GST. |
| Tax Collection | Taxpayers must pay GST at different rates, depending on the type of goods or services supplied. | The taxpayer has to pay a lower tax rate. |
| Supply Services | Taxpayers can supply all kinds of services. | Taxpayers can only supply specific services. |
| Not Eligible To Opt For The Scheme | There are no exceptions. | The following cannot opt for the scheme: The person carrying interstate supplies Supplier of non-taxable goods Supply of goods via e-commerce portal. Producer of ice cream, tobacco, or pan masala Businesses whose turnover exceeds the prescribed limits. |
| Specified Condition Of Scheme | No firm using the same PAN can be registered under the composition system once the taxable person has registered under the standard GST scheme. | Below are the specific conditions: No dealer under this scheme can claim the input tax credit. The dealer cannot supply GST-exempted goodsThe dealer can supply services to 10% of the turnover or Rs. 5 Lakh or whichever is higher.The taxpayer under this plan must state on each bill, notice, and signboard at their place of business that they are a taxable person and are not allowed to collect taxes.Tax should be paid at the normal tax rates under the reverse charge mechanism. If a PAN name is used for more than one type of business, they must register them all under this programme or choose not to participate. |
| What To Issue | Tax Invoice | Bills Of Supply |
| GST Payment | The GST is payable as: Output GST – Input GST+Tax on Reverse Charge. | The GST is payable out of pocket for the supplies as: GST on supplies made+Tax on reverse charge |
| Merits | The following are the merits of a regular GST scheme:It has unlimited business territory. Availability of input tax credit paid.It can be sold via an e-commerce portal. | The following are the merits of a composite GST scheme: It has less complianceIt just has a small tax obligation.It does not require keeping ledgers.Because the taxes are paid at a reduced rate, there is a lot of liquidity. |
| Demerits | The following are the demerits of the regular GST Scheme:It has more compliance than composite GST, i.e., several returns will be filed. Less liquidity prevents huge tax amounts in e-ledgers; one can only access input when the provider has submitted the return. Detailed accounting records must be kept. | The following are the demerits of the composite GST Scheme: It has limited territory business as it does not allow interstate transactions. No input tax credit is available to dealers.The taxpayers are not eligible for the supply of exempted goods or goods via the e-commerce website. |
| Restriction on SEZ | There is no restriction on export or supply to SEZ or SEZ developers. | A person who cannot make any supplies for SEZ or its developers. |
| Condition To Opt-Out | Any person can opt out of the regular GST scheme at any time. | The taxpayer cannot opt out of the scheme until the end of the financial year. |
Conclusion
Both the regular and composite GST schemes have their respective advantages and disadvantages. While the regular scheme offers flexibility and allows businesses to claim input tax credits, it also involves more compliance requirements and higher tax liability. Whereas, the composite scheme offers easy compliance procedures, lower tax rates, and is suitable for small businesses with lower turnovers. However, it has limitations against input tax credits and restricts businesses from supplying goods and services outside the state. Businesses must assess their specific needs and circumstances before choosing between regular and composite GST schemes.
Frequently Asked Questions
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What is the primary difference between GST Regular and Composition schemes?The primary difference between the GST Regular and Composition schemes is the compliance burden and tax rate. Regular GST requires monthly returns and input tax credit, while the Composition Scheme offers quarterly returns with a simplified tax rate but restricts input tax credit.
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How does the Regular GST vs Composition GST scheme impact small businesses?In the Regular GST vs. Composition GST debate, small businesses often prefer the Composition Scheme due to its simplified compliance and lower tax rates. However, they cannot claim input tax credit, which is available in the regular scheme.
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Can you explain the difference between Composition and Regular GST schemes?The difference between the Composition and Regular GST schemes lies in the tax rate and filing frequency. The Regular GST scheme requires higher compliance with monthly returns and higher tax rates. In contrast, the Composition GST scheme offers lower tax rates and quarterly returns but limits the input tax credit.
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What are the eligibility criteria for Regular GST vs Composition GST?For Regular GST vs Composition GST, any business can opt for the regular scheme, but only those with an annual turnover of up to ₹1.5 crore (₹75 lakh for some states) can choose the Composition Scheme.
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What makes the difference between Regular and Composition GST important for businesses?The difference between Regular and Composition GST is crucial as it affects the business’s tax burden and compliance requirements. The Regular Scheme involves detailed records and higher taxes but offers input tax credits, while the Composition Scheme simplifies the process at the cost of higher compliance limitations.
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How does the difference between GST Regular and Composition affect tax filing frequency?The difference between GST Regular and Composition significantly impacts tax filing frequency. Under the Regular GST scheme, businesses must file monthly returns, whereas the Composition Scheme allows for quarterly filings, easing the compliance burden for smaller firms.
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In what way does the difference between the Regular GST scheme and the Composite GST scheme influence input tax credit?The difference between the Regular GST scheme and the Composite GST scheme is particularly evident in input tax credit eligibility. The Regular GST scheme allows businesses to claim input tax credits on purchases, whereas the Composition Scheme does not.
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What are the critical factors in choosing between Regular vs Composition GST?Choosing between Regular vs. Composition GST depends on business size, turnover, and compliance capability. Larger businesses might prefer Regular GST because of the input tax credit, while smaller businesses may opt for the Composition Scheme due to its simplified tax structure and lower rates.
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How does the difference between regular and composition GST impact the tax rate?The difference between regular and composition GST significantly impacts the tax rate. The Regular GST scheme has standard GST rates ranging from 5% to 28%, whereas the Composition Scheme has a fixed lower rate (1% for manufacturers and traders, 5% for restaurants).
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Can you detail the difference between GST Regular and Composition regarding compliance?The frequency and complexity of filings mark the difference between GST Regular and Composition in compliance. The Regular GST requires monthly GSTR-1, GSTR-3B, and annual GSTR-9 filings, while the Composition Scheme simplifies this to quarterly CMP-08 and annual GSTR-4 filings.
