Negative Liability in GSTR-4- Filing of Annual Returns by taxpayers

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As we know, under the Composition scheme taxpayers have to file a CMP-08 challan. Consequently, Composite taxpayers filing Annual Returns are facing issues in the portal. Several taxpayers reported an issue of negative liability appearing in GSTR-4.

In this article, we will understand the government’s notification on Negative Liability in GSTR-4.

What are GSTR-4 and CMP-08?

The taxpayers under the composition scheme have to submit CMP-08. It is also known as quarterly challan-cum-statement.

The CMP-08 is used to declare the details or summary of his/her self-assessed tax payable for a given quarter. Furthermore, the CMP-08 also acts as a challan for making payment of tax.  The due date to file CMP-08 is the 18th of the month following the relevant quarter, also any delay will attract interest for the period of delay at 18% p.a.

On the other hand, GSTR-4 is the yearly return that all composition taxable individuals must file on or by the 30th of April of each financial year.

It includes an annual consolidated overview of financial year turnover, tax liabilities, and tax-paid information.

Important Note: In addition to Form CMP-08, a composition dealer must file his or her annual return using the new Form GSTR-4. It has to be filed by the 30th of April after the end of a fiscal year.

What is Negative Liability in GSTR-4?

A negative Liability Statement is a report accessible on the GST site. It indicates any negative summary in CMP-08 for the current quarter that will be carried forward to the following quarter’s liability for adjustment.

The submission of GSTR-4 helps in determining the balance in the Negative Liability Statement at the end of the financial year.

Reason of Negative Liability appearing in GSTR4

The liability of the complete year is required to be declared in GSTR-4 under applicable tax rates. Taxpayers should fill up table 6 of GSTR-4 mandatorily. In case, there is no liability, the said table 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 the same for subsequent tax period’s liability.

Mistakes happening when taxpayers file GST returns!

For the convenience of taxpayers, liability paid using Form GST CMP-08 is auto-populated in table 5 of the GSTR-4.

Taxpayers who do not fill out table 6 of GSTR-4, i.e. no liability is disclosed. Despite the fact that the liability may have been paid through Form GST CMP-08.

The reason for this is the ‘Tax payable’ in GSTR-4 is determined after lowering the liability declared in GST CMP-08. Then auto-populates in table 5.

As a result, if nothing is stated in table 6, GSTR-4 will show a negative liability item.

In conclusion, Filing GST Returns is a complex task. The issues such as Negative Liability in GSTR-4 may confuse taxpayers and waste a significant amount of time and effort. Hence, taxpayers can seek professional assistance to file GST Returns on time and without any hassle.

New functionalities to be deployed on GST Portal from July, 2021

If you want any other guidance related to GST Registration or GST Return filing, please feel free to talk to our business advisors at 8881-069-069.

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