Dilemma In Filing of GSTR-4 by Composition Tax Payers

Composition Scheme was introduced for small taxpayers with the aim of providing relief from cumbersome and difficult procedure prescribed for regular taxpayers. Section 10 of the CGST Act prescribes eligibility conditions for obtaining registration as a composition tax payer. A plain reading of section 10 and the relevant rules which has undergone frequent amendments from time to time will show how difficult it is for a small tax payer to understand the basic provisions.

Earlier on April,6,2018 the composition taxpayers were asked to file the details of purchases in quarterly returns which was deferred again on representations received from various stakeholder. Again such dealers were required to file the details of purchases in GSTR-4 (Annual Returns) from F/Y 2019-20 onwards. This is very difficult for persons who are maintaining manual books of account.

The annual return in GSTR-4 is to be filed on or before 30^th April for the preceding financial year. This date is too early as no time is left for reconciliation of accounts with the selling dealers. Annual returns for the year 2019-20 were filed in a hurried manner leaving scope for certain omissions and commissions. While filing the annual returns for F/Y 2019-20 and 2020-21 the portal never flagged any error regarding any mistake if any in the return. The taxpayer in majority of the cases submitted the return as auto populated on the portal.

An advisory was issued by GSTIN on 22/07/2021 which is reproduced as under:-

Filing of Annual returns by composition taxpayers. – Negative Liability in GSTR-4 Instances have come to notice where taxpayers are reporting negative liability appearing in their GSTR-4

Background: Since FY 2019-20, composition taxpayers has to pay the liability through Form GST CMP-08 on quarterly basis while GSTR-4 Return is required to be filed on annual basis after end of a financial year.

Reason of Negative Liability 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 ‘0’ value. If no liability is declared in table 6, it is presumed that no liability is required to be paid, even though, 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.

What the taxpayer did wrongly: Liability paid through Form GST CMP-08 is auto-populated in table 5 of the GSTR-4 for convenience of the taxpayers. Taxpayers who do not fill up table 6 of GSTR-4 i.e. no liability is declared, even though, 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.

How to proceed in case of negative liability: If table 6 of GSTR-4 has not been filled due to oversight, a ticket may be raised to nullify the amount available in negative liability statement. If there is no liability to be paid during the year, the liability paid through Form GST CMP-08 shall move to negative liability statement and the same excess amount can be utilised to pay the liability of future tax periods.

Some of the experts advised the tax payers to use the DRC-03 form to adjust the negative tax liability of the previous years. Majority of the tax payers adopted this route.

Some of the experts advised the taxpayers to enhance the turnover of the subsequent quarters to offset the negative liability created for the previous financial year.

Now suddenly a fresh advisory has been issued by the team GSTIN on 25/04/2022 which is reproduced as under:-

Dear Taxpayer,

It has been noticed that you have inadvertently declared liability in table 6 which is less than table 5 (auto-populated from CMP-08s) of GSTR-4 for the FY 2019-20. Consequently, the differential amount of liability has been credited to Negative Liability Statement resulting in a positive balance which can be utilised for future tax period’s liability. Where the difference exceeds certain value, the same has been debited from the negative liability statement. In case, you have already utilised the amount, the recovery of inadmissible amount so utilised is being made by debiting the cash ledger which may become negative, if sufficient balance is not available in cash ledger. The negative balance in cash ledger shall be adjusted out of the amount to be deposited through challan.

You are, therefore, requested to:

• Deposit the amount equal to the negative balance in cash ledger urgently, in case there is a negative balance.
• In case you have 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.

Certain taxpayers raised a grievance on the GSTIN portal to the effect that in fact no tax was payable because DRC-03 was filed only to offset the negative liability by way of caution that the said negative tax liability may not be inadvertently utilized against the tax liability of the subsequent periods. The resolution provided by the GSTIN is to deposit the amount equal to the negative balance in cash ledger, in case there is negative balance and in case you have already paid the amount, now being debited in cash ledger by including the same in any return/statement the same can be claimed as refund by filing refund application in Form GST RFD-01 in respect of the excess tax paid.

The tax payers has been subjected to a very difficult and harsh situation as being small businesses it is very difficult to deposit the tax again and apply for refund later on.

In the absence of compliance with the resolution provided by the GSTIN the tax payers are not allowed to file GSTR-4 for the F/Y 2021-22. In case of default in filing GSTR-4 late fees is levied @50/- Rs. Per day. This is further aggravating the difficulty of the tax payers’ inspite of the fact that no tax was due.

Suggestions

• The due date of filing GSTR-4 should be the same as the date of filing GSTR-9 or in the alternative the due should be suitably amended.
• The liability for payment of tax is only due to technical glitches of the portal which should be resolved without any further delay.
• The due date for filing GSTR-4 for the F/Y 2021-22 should be suitably extended till any resolution is worked out by GSTIN.

K.K. Singla (Advocate)
President Patiala Tax Bar Associaiton.
Vice President Punjab Tax Bar Association