Gstn Advisory To Composition Taxpayers on Negative Liability

The

Goods and Services Tax Network (GSTN) has issued an advisory dated April 30, 2022, to Composition Taxpayers on Negative Liability. With this Advisory, GSTIN requested the taxpayer to deposit the amount equal to the negative balance in the cash ledger urgently, in case there is a negative balance. In case the taxpayer has already paid the amount, now being debited in cash ledger or negative liability statement by including the same in any return/statement, the same can be claimed as refund by filing refund application in Form GST RFD-01.

The Gist of GSTN Advisory

The Gstn Advisory To Composition Taxpayers on Negative Liability is as follows: While filing

GSTR-4 of any financial year, the taxpayer may not fill up table 6 of the GSTR-4 return, consequently, whatever the amount was paid through Form CMP-08 of the year was credited to the negative liability statement.

Now, the GSTIN system has nullified such negative liability from the negative liability statement. If the taxpayer has utilized any amount from the statement, the same has been debited in the cash ledger.
In case the balance in the cash ledger has become negative, kindly deposit the amount through challan for such amount.
In case the taxpayer has already paid the amount credited to negative liability through DRC-03 or DRC-08 or GSTR-4 of the next FY, then the taxpayer can claim a refund of the excess amount paid by filing a refund application in Form RFD-01.
GSTIN has also sent an email to the taxpayer about the debit entries.

Note on Form GST CMP-08 and Form GSTR-4

Since FY 2019-2020, composition taxpayers have to pay the liability through

Form GST CMP-08 on a quarterly basis while GSTR-4 Return is required to be filed on annual basis after the end of a financial year.

Note on Negative Liability Statement

A negative Liability Statement refers to a report available on the GST portal that shows any negative summary in Form CMP-08 for the present quarter that will be carried forward to the next quarter for adjustment against the next quarter’s liability. Balance in the Negative Liability Statement can be known at the closure of the financial year upon submission of GSTR-4 of previous years.

Steps to View the Negative Liability Statement

The Negative Liability Statement can be accessed on the GST portal after logging into the GST portal.

The taxpayer needs to access the GST portal and navigate to the “Services” and Select the “Ledgers” option.
Click on the “Negative Liability Statement” button to view the Negative Liability Statement.

Reason for Negative Liability in GSTR-4

The liability of the complete year is required to be declared in GSTR-4 under applicable tax rates. Taxpayers need to provide details in table 6 of Form GSTR-4 mandatorily. In case, there is no liability, table 6 of Form GSTR-4 may be filled up with a ‘0’ value. If no liability is declared in table 6, it is presumed that no liability is required to be paid, even though; the taxpayer may have paid the liability through Form GST CMP-08. In such cases, liability paid through GST CMP-08 becomes excess tax paid and moves to Negative Liability Statement for utilization of same for subsequent tax period’s liability

Reason for Composition Dealers Facing Negative Liability in GSTR-4

Liability paid through Form GST CMP-08 is auto-populated in table 5 of the GSTR-4 for the convenience of the taxpayers. Taxpayers who do not fill up table 6 of GSTR-4 i.e. no liability is declared, even though, the taxpayer may have paid the liability through Form GST CMP-08; since the ‘Tax payable’ in GSTR-4 is computed after reducing the liability declared in GST CMP-08 and then auto-populated in table 5. Thus, if nothing is declared in table 6, then the negative liability entry appears in GSTR-4

Procedure to Nullify Negative Liability Adjustment

To Nullify Negative Liability Adjustment, An aggrieved taxpayer may write to the jurisdictional GST officer or raise a ticket on the grievance portal as soon this issue comes to his notice as a first step

The Debit of the Negative Liability

In the past, a lot of tickets were received on the GSTIN Helpdesk for reducing the negative liability from the Negative Liability Statement and the same was being done. For the convenience of the taxpayers, the amount available in the negative liability statement has been debited for all taxpayers. GSTN has noticed that some taxpayers had utilized the amount available in the negative liability statement for paying the liability to file a statement in Form GST CMP-08 or GSTR-4 of the subsequent financial year. In such cases, the amount utilized out of the negative liability statement has been debited in the cash ledger. Though such liability should have been paid by depositing the amount through challan in some cases, the amount had not been deposited by the taxpayers.

For the taxpayer who has deposited the amount in the cash ledger, the debited amount has been adjusted whereas in case the amount of liability has not been deposited through challan, the balance in the cash ledger becomes negative.
In such cases, the taxpayers are advised to deposit the past liability through challan of an equal amount urgently.
The details of the debit so made have been communicated to all such taxpayers through emails available on the portal.
In case, the liability had been paid by adding in the next year’s liability, the same can be claimed as a refund through application in Form GST RFD-01.

Back to Learn

Frequently Asked Questions

Common questions about GSTN Advisory for Composition Taxpayers.

A Negative Liability Statement refers to a report on the GST portal that displays any negative balance or excess tax paid by a composition taxpayer through Form GST CMP-08 for a particular quarter. This negative amount can be carried forward and adjusted against the liability for the subsequent quarter.

Composition taxpayers may face negative liability while filing GSTR-4 (the annual return) if they do not fill up Table 6 of the form, which is meant for declaring the annual tax liability. If Table 6 is left blank, the system assumes no liability, even if the taxpayer has already paid taxes through Form GST CMP-08 during the year.

If a taxpayer has a negative balance in their cash ledger due to the GSTN system debiting the negative liability amount, they are advised to deposit an amount equal to the negative balance urgently through a challan.

Yes, if a taxpayer has already paid the amount that was credited to the negative liability statement through DRC-03, DRC-08, or GSTR-4 of the next financial year, they can claim a refund of the excess amount paid by filing a refund application in Form GST RFD-01.

To view the Negative Liability Statement, a taxpayer needs to log in to the GST portal, navigate to the "Services" section, select the "Ledgers" option, and click on the "Negative Liability Statement" button.

Form GST CMP-08 is used by composition taxpayers to pay their quarterly tax liability under the Composition Scheme. The liability paid through this form is auto-populated in Table 5 of the annual GSTR-4 return.

GSTN debited the negative liability amount from taxpayers' accounts to nullify the negative adjustment and resolve the issue of taxpayers utilizing the negative liability amount for paying tax liabilities in subsequent periods without depositing the actual amount.

If a taxpayer received an email from GSTN regarding a debit entry in their cash ledger due to the negative liability adjustment, they should either deposit the amount through a challan or claim a refund if they have already paid the amount earlier.

Yes, if a taxpayer is facing issues or has concerns regarding the negative liability adjustment, they can raise a ticket on the GSTN grievance portal or write to their jurisdictional GST officer.

Table 6 in Form GSTR-4 is crucial for composition taxpayers as it is meant for declaring their annual tax liability. Not filling up this table correctly can lead to the issue of negative liability, as the system assumes no liability if Table 6 is left blank.