Composition scheme

With a turnover of ₹1.2 Crore in Delhi, you are eligible for the Composition Scheme as a trader/manufacturer. You will pay a flat 1% GST on your turnover, file Form CMP-08 quarterly and GSTR-4 annually, and issue "Bills of Supply" instead of Tax Invoices. You are not eligible for Input Tax Credit, and no GST Audit (GSTR-9C) is required for your category. Ensure you maintain accurate sales and purchase registers to avoid penalties and to track potential RCM liabilities.

At Rs 1.2 crore turnover, you are well within the composition scheme limit of Rs 1.5 crore (applicable in Delhi). The basic framework is correct: 1% GST on turnover (0.5% CGST + 0.5% SGST), file CMP-08 quarterly, GSTR-4 annually.

A few fabric-specific points to keep in mind:

1. HSN classification matters: fabric falls under Chapter 50-63 of the GST tariff. Confirm whether your specific fabric category is taxed at 5% or 12% under the normal scheme, because composition rate is a flat 1% regardless of the applicable GST rate on your goods. If your output rate is 5%, composition saves you 4% on each transaction. If it is 12%, you save 11%.
2. Inter-state sales: composition scheme applies only to intra-state (Delhi) supplies. If any sales go to other states, you must exit composition for those transactions and register under the regular scheme. This is a common restriction missed by traders.
3. Accounting records: although formal audit (GSTR-9C) is not required, you must maintain purchase registers, sales registers, and stock registers. Keep all purchase invoices to establish RCM (reverse charge mechanism) liability on any notified purchases.
4. RCM vigilance: if you purchase from unregistered suppliers above the prescribed threshold, you must pay RCM on those purchases even under composition.

For complete GSTR-4 filing steps and CMP-08 calculations, this [GST composition scheme guide](https://taxgarden.in/blog/gst-composition-scheme-eligibility-rates-india-2026) covers the FY 2026-27 rules.