1. No Input Tax Credit - Composite Dealer cannot claim ITC. Thus, tax paid on purchase cannot be utilized for payment of tax on sale


  2. Cannot collect GST on Sales - Composite Dealer cannot collect GST from customers on sale. However, he must pay GST at fixed rate on turnover of business


  3. No E-Commerce Sales - Composite Dealer cannot sell goods or services through e-commerce platform. Therefore, if seller wants to sell products online on e-commerce portal, he must compulsorily register under regular scheme


  4. No Inter-State Sales - Composite Dealer cannot sell goods outside state of registration. It cannot carry out export of goods. Thus, there is limited territory for business and expansion is difficult


  5. Heavy Penalty - If dealer has obtained registration under Composition Scheme without being eligible for same, he is liable to pay amount of differential tax and penalty of up to 100% of tax liability


Read more - What are disadvantages of registering under Composition Scheme in GST?