A novel and simple control technique for reducing current harmonics in a grid connected non linear load using composite observer is discussed in this paper. In this scheme, In-phase and Quadrature components of fundamental as well as harmonics of load current and inverter current are estimated using composite observer. Estimated harmonics from the load current are fed forward to generate the control signal for driving the inverter for compensating harmonics. In-phase and Quadrature components of fundamental load current are used to compensate for reactive power using decoupled d-q control. Also depending on the availability of renewable energy, the direct axis component controls the active power injection into the grid. In order to validate the above mentioned control scheme, simulation study has been done using MATLAB and the results are discussed.