GST Composition Scheme Checklist

Composition (6%) vs Regular (18%) - Detailed Client Reference

CA Dhiraj Ostwal | Chartered Accountant | The Business Strategist

1.Turnover Thresholds - Where Do You Stand?

• Below Rs.20 lakh aggregate turnover (all professional receipts, taxable + exempt, added together): no GST registration required at all. (Rs.10 lakh threshold applies in special category states.)
• Track your turnover continuously - the registration obligation begins the day you cross the threshold; this is your own responsibility.
• Rs.20 lakh - Rs.50 lakh: GST registration becomes mandatory. You then choose between Composition and Regular scheme.
• Rs.50 lakh and above: Composition scheme is no longer available - Regular scheme applies with full ITC (Input Tax Credit) discipline.
• Healthcare services provided by doctoRs. remain GST-exempt. Non-clinical income (e.g., lecture fees, brand endorsements, consultancy to companies) is taxable and counts toward turnover.

2.GST Options by Income Slab

Key conditions: Composition - no ITC, no inter-state supply, cannot collect GST from client, RCM still applies. Regular (B2B) - clients claim ITC, so pricing stays neutral.

3.Composition (6%) vs Regular (18%) - The Basics

• Composition scheme for service provide Rs flat rate of 6% on turnover.
• Regular scheme: 18% GST is collected from the client and paid to the government; you can claim Input Tax Credit (ITC) on your business expenses.
• Example from the guide: an architect with Rs.40 lakh receipts, mostly B2C (individual) clients - Regular scheme burden (if the client doesn't pay extra) is about Rs.7.2 lakh; Composition is about Rs.2.4 lakh - a headline difference of about Rs.4.8 lakh per year.
• For B2B clients (who themselves claim ITC), the Regular scheme's 18% is collected from the client and is a near-zero real cost to you.

4.Conditions & Limitations of Composition

• You cannot collect GST from your client - the 6% comes out of your own pocket.
  
  You get no Input Tax Credit (ITC) on your expenses.

• You cannot make inter-state supplies - only within your own state.

5.The RCM (Reverse Charge) Trap - Read Before Choosing 6%

• Reverse Charge Mechanism (RCM) means that for certain expenses, you - not the seller - must pay the GST directly. This obligation applies fully to Composition dealers too.
• Because Composition blocks ITC, any RCM you pay is never recovered - it is pure dead cost.

RCM Quick-List for Professionals

• Legal/advocate fees - 18%
• Individual CA/audit fees - 18%
• Office rent paid to an unregistered landlord - 18%
• Import of services - foreign software subscriptions such as Adobe, Zoom, Canva, Descript, Notion, ChatGPT- 18% IGST
• GTA freight - 5%
• SponsoRs.hip - 18%

Under Composition, these are pure dead cost; under Regular, they return as ITC.

Worked Example (Rs.40 Lakh Professional, Composition Scheme)

• Under the Regular scheme, the same expenses' RCM of Rs.81,000 returns as ITC, and the 18% itself is collected from clients - not paid from your own pocket.

6.Decision Rule - Which Scheme Fits You?

• Clients are B2C and your RCM-attracting expenses are low: Composition tends to win.
• Clients are B2C but RCM expenses are heavy (effective rate can reach 8-10%): the Composition advantage may disappear - recheck the numbeRs..
• Clients are mostly B2B: choose Regular scheme, every time.
• Mixed client base (some B2B, some B2C): consider a GST-splitting structure - e.g., route B2B work through an LLP (18% + ITC for the client) and keep B2C work in your individual name under Rs.20 lakh (no GST).

7.GST Splitting Strategy - Safeguards

• Under GST law, every distinct PAN is treated as a distinct peRs.on - your individual practice and your LLP are two separate suppliers, each with its own Rs.20 lakh threshold.
• Route corporate/B2B clients (who need ITC) through the LLP; keep individual/B2C clients (walk-ins, individual patients) under your personal name below Rs.20 lakh.