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Comparison between Normal Tax Payers and Composition Scheme under GST

Comparison between Normal Tax Payers and Composition Scheme under GST


Peoples are getting afraid under GST regime about composition scheme. I will give you some presentation by way of example.

Particulars Description Registered as a Normal Taxpayer Description Registered as a Taxpayer under Composition Scheme
A Total Sale Value 112000 Total Sale Value 112000
B Sales Value exclusive of taxes 100000 Sales Value exclusive of taxes i.e.


C GST @ 12% on sales value 12000 GST @ 2% on sales value 2196*
D Input Purchases 70000 Input Purchases 70000
E GST @ 12% 8400 GST @ 12% 8400
F Total Purchase Value (D+E) 78400 Total Purchase Value (D+E) 78400
G Net GST Liability (C-E) 3600 Net GST Liability (only C) 2196
H Net Profit {A-(F+G)} 30000 Net Profit {A-(F+G)} 31404



*Under composition scheme

A supplier cannot collect composite tax separately in an invoice. Here breakup is given only for reference and understanding purpose.

Thus if you see in above example, a supplier registered under the composition scheme and supplying such goods to the consumer at similar rates is earning more profit and his tax liability is also lower.

Other benefits under composition scheme:-

Below are some of the prominent reasons why you should choose to get registered as a supplier under the composition scheme:

  • Limited Compliance:  Under the composition scheme, the taxpayer is required to furnish quarterly return only, and thus he need not worry on record keeping and can focus on his business more rather than being occupied in compliance procedures.
  • Limited Tax Liability: Another benefit of getting registered under the composition scheme is that the tax rate for such taxpayer is nominal under the GST Law
  • High Liquidity: One of the major benefits of registering as a composition supplier is high fund availability in the business. A normal taxpayer will be required to pay output tax on his supplies at a standard rate and any credit of input is available only when his own supplier files a return online which shall reconcile with his own return. Thus a large chunk of his working capital will always remain blocked in the form of input credit. However for a supplier registered under the composition scheme, output liability will be nominal and he does not need to bother about return filing by his supplier.


I hope this article is beneficial for those who were confused whether to opt composition scheme or register as a normal tax payer.

Thanks & regards


Comments ( 4 )

  1. Sir in your example 2% Will be charge on total sale value of rs 112000 becasue under composition scheme gst will charges on sale value ,if we sale goods to customer for rs 112000,then gst will also be charge on rs will be not charge on 109804.hence here gst libility will be rs 2240 (112000*2%=2240).therefor profit under composition scheme  will be =31360(112000-78400-2240)

    • Mr. Deepak arora, in this example the sales value is rs.1,09,804 exclusive of composite tax.

      • ok but sir if gst hum 109804 par nikalege to bill bhi to 109804 s he raised karna padega.

        but  in example jo profit findout kiya aapne 31404, vo aapne total sale m s , cost and gst liablity minus karke nikala h. it means customer ko bill 112000 ka raised kiya hoga and rs 112000 receive huye hoge tbhi to aap total sale m s cost minus karke profit nikal rhe h.  if we raised bill of rs 112000.then we have to pay gst on bill amount i.e on rs 112000

        • let us assume 112000 is MRP of product. normal as well as composition dealer sells goods on same price but composite dealer don’t show or charge composite tax from customer  2240(112000*2%) and hence it is paid to govt.but yes, its clerical mistake the composite tax will be 2240 instead of 2196/- (grossing up method)  and profit will be 31360/- i admire your query and your activeness on these article.


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