For a retail hardware shop with a turnover under £1.5 crore and predominantly unregistered customers, the composition scheme can be a simpler option. However, it imposes significant restrictions, including limitations on interstate sales, exports, service provision, and selling via e-commerce platforms. Crucially, you'll forgo input tax credits (ITC) and customers may require tax invoices for their own ITC claims. Carefully weigh these limitations against your business's expansion plans and customer base before deciding.
08 August 2020
For a shop with quite low turnover , it is better to opt for composition scheme but please be mindful that it comes with severe restrictions.The major ones are- Cannot supply interstate – goods and services.
1.Cannot make export of/supply to SEZ, goods or services
2.Goods supplier cannot supply more than 10% services.
3.Cannot sell through e-commerce operator websites (say Amazon) who is collecting TCS.
4.Loose out on ITC of the GST paid on purchases of goods/services
5.Customers may insist on tax invoice with GST to claim ITC.
So it all depends on your expansion plans and customer base and plans.you will see a useful article on this in next couple of days. I am just in the process of finalising it.