Taxpayers who have completed online GST registration, must first understand what Negative Liability for GST Advisory is, to know how to alter the amount in statement. On April 30, 2022, GSTN, the Goods and Services Tax Network, issued an advisory to composition taxpayers regarding negative liability.
Composition taxpayers must make the quarterly payment starting with the 2019–20 financial year. They must submit Form GST CMP-08 and Form GSTR-4 for returns .
In GSTR-4, “tax payable” is determined after deduction of liability reported in GST CMP-08 is made (which is fetched in Table 5 automatically). The advisory states that taxpayers must provide their annual tax liability, calculated at the applicable tax rates, in GSTR-4.
‘0‘ is entered, if no obligation is found in Table 6 in GSTR -4. Even if the taxpayer has successfully paid liability with Form GST CMP-08, here it is assumed that taxpayer has no obligations to pay. It is shown as a negative liability item in Form GSTR-4 and treated as an additional tax payment.
What is the treatment of negative liability?
The issued Advisory to Taxpayers on Negative Liability is as follows:
Composition taxpayers may fail to complete Table 6 of Form GSTR-4 return . Amount paid by the taxpayer through Form CMP-08 goes to the credit of negative liability statement.
- Such a negative liability has currently been removed from the negative liability statement by the GSTIN system. If the taxpayer used any amount from the statement, that amount would be removed from the cash ledger.
- If the cash ledger balance goes negative, the taxpayer must deposit the money using a challan for that amount.
- The taxpayer may request a refund of the excess amount if the payment of the amount that has been credited to negative liability has been made through DRC-03, DRC-08, or GSTR-4 of the following Financial Year. In order to do this, he or she must complete Form RFD-01, a refund application.
- In relation to the debit entries, GSTIN emails the taxpayer.
The GST login website has a report called a negative liability statement. It includes a negative summary for the current quarter in Form CMP-08.
Checking the Negative Liability Statement
By submitting Form GSTR-4 of last year, at the fiscal year end negative liability statements with balance can be checked. Logging into the GST website, the taxpayer has access to the negative liability statement.
- The taxpayer should go to the GST website, select ‘Services’, and then select ‘Ledgers’
- To check the negative liability statement, the user must then select the ‘Negative Liability Statement‘ option
Way to nullify Negative Liability Adjustment
The first step in invalidating a negative liability adjustment is for the taxpayer to raise a ticket on the website for grievances or write to the relevant jurisdictional GST (Goods and Service Tax) officer as soon as they become aware of this problem.
Debit of the Negative Liability
Additional amount in the negative liability statement has been reduced. GSTN noted some taxpayers provided the liability in order to file a statement in Form GSTR-4 or GST CMP-08 of that fiscal year by using extra amount that was made available in the negative liability statement. This amount is debited in the cash ledger. However, certain exceptions do exist here!
To sum up with a few pointers :-
- When the taxpayer deposits the liability through a challan, the cash ledger balance is changed; however, when the liability is not deposited, the balance becomes negative
- In these situations, it is advised that the taxpayers deposit their former liability as quickly as possible using a challan for the same amount
- The taxpayers will receive information about the deduction via emails that may be accessed on the GST website
- By submitting Form GST RFD-01, the taxpayer may claim a refund of the same amount even if the liability has been revised to include the liability for the next year
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