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May 3, 2022

Know all about GSRT4 and Advisor for GSRT4

by CA Shivam Jaiswal in GST, GST Circular Notification

Know all about GSRT4 and Advisor for GSRT4

GSTR-4 is a GST Return that has to be filed by a composition dealer. Unlike a normal taxpayer who needs to furnish 3 monthly returns, a dealer opting for the composition scheme is required to furnish only 1 return which is GSTR 4 once in a year by 30th of April, following a financial year.

The Composition Scheme was created for small taxpayers with the goal of relieving them of the time-consuming and complicated procedures that normal taxpayers must follow. Section 10 of the CGST Act establishes the requirements for registering as a composition tax payer. A simple study of section 10 and the accompanying rules, which have been amended numerous times over the years, demonstrates how difficult it is for a small tax payer to comprehend the basic principles. Earlier this year, on April 6, 2018, composition taxpayers were required to provide details of purchases in quarterly returns, however this was postponed again due to feedback from numerous stakeholders. From F/Y 2019-20 onwards, such merchants were required to file the details of their purchases in GSTR-4 (Annual Returns).

This is quite difficult for people who keep manual books of account. For the previous financial year, the annual return in GSTR-4 must be filed on or before April 30th. This deadline is too soon because there isn’t enough time to reconcile accounts with the selling dealers. Annual returns for the 2019-20 fiscal year were filed in a hasty manner, providing room for omissions and commissions. When filing yearly reports for fiscal years 2019-20 and 2020-21, the site never highlighted any errors or errors in the return. In the vast majority of situations, the taxpayer used the portal’s auto-fill feature to submit the return.

Composition taxpayers filing annual returns. – Negative Liability in GSTR-4 Instances have been noticed where taxpayers are reporting negative liability in their GSTR-4. Background: Beginning in FY 2019-20, composition taxpayers must pay their liabilities quarterly using Form GST CMP-08, whereas the GSTR-4 Return must be completed annually after the conclusion of the fiscal year.

Reason for Negative Liability in GSTR4: Under relevant tax rates, the liability for the entire year must be recorded in GSTR-4. Table 6 of GSTR-4 must be completed by all taxpayers. If there is no liability, the table can be populated with a value of ‘0’. If no obligation is reported in table 6, it is assumed that no liability must be paid, even if the taxpayer paid the liability using Form GST CMP-08. In such instances, the liability paid by GST CMP-08 becomes excess tax paid, and it is transferred to the Negative Liability Statement to be used for future tax periods’ liabilities.

What the taxpayer made a mistake on: 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 obligation is disclosed, despite the fact that the liability may have been paid through Form GST CMP-08, because the ‘Tax payable’ in GSTR-4 is determined after decreasing the liability declared in GST CMP-08 and then auto-populated in table 5. As a result, if nothing is disclosed in table 6, GSTR-4 will show a negative liability item.

In the event of a negative liability, a ticket may be raised to negate the amount available in the negative liability statement if table 6 of GSTR-4 has not been filled due to an oversight. If there is no responsibility to be paid throughout the year, the liability paid using Form GST CMP-08 will be transferred to a negative liability statement, and the surplus money can be used to cover future tax periods’ liabilities. Some tax professionals encouraged taxpayers to utilise the DRC-03 form to adjust their prior year’s negative tax liability. This was chosen by the vast majority of taxpayers.

It has been discovered that you have inadvertently declared liability in table 6 of GSTR-4 for FY 2019-20, which is less than table 5. As a result, the difference in liability has been credited to the Negative Liability Statement, resulting in a positive balance that can be used to pay for future tax periods’ liabilities. The difference has been debited from the negative liability statement where it exceeds a certain amount. If the amount has already been used, the inadmissible amount is recovered by debiting the cash ledger, which may become negative if there is not enough balance in the cash ledger. The money to be deposited by challan will be used to offset the negative balance in the cash ledger.

If there is a negative balance, you must deposit the amount equivalent to the negative balance in the cash ledger as soon as possible. If you have already paid the amount that is now debited in your cash ledger or negative liability statement by included it in any return or statement, you can request a refund by filling out Form GST RFD-01. Certain taxpayers complained on the GSTIN portal that no tax was due because the DRC-03 was only filed to offset the negative tax liability as a precaution against the aforementioned negative tax liability being used accidentally against the tax liability of later periods.

If there is a negative balance and 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 a refund by filing a refund application in Form GST RFD-01 in respect of the excess tax paid. Taxpayers have been put in a tough and hard situation because it is difficult for small firms to deposit the tax again and request for a refund later. Taxpayers are not permitted to file GSTR-4 for the fiscal year 2021-22 unless they comply with the GSTIN’s resolution. Late fines of Rs. 50/- per day are charged if GSTR-4 is not filed on time. Despite the fact that no tax was due, this is exacerbating the tax payers’ difficulties.

The due date for GSTR-4 should be the same as the due date for GSTR-9, or the due date should be appropriately changed. The tax burden arises solely as a result of technical issues with the portal, which should be remedied as soon as possible. The deadline for filing GSTR-4 for the fiscal year 2021-22 should be appropriately extended till GSTIN finds a solution.

Advisor for GSRT4

Dear Taxpayer,

It has been noticed that while filing GSTR-4 of the FY 2020- 21, you have inadvertently either

  • not filled up table 6 of the said return, or
  • filled up zero values therein,

even though you have paid the liabilities for theyear through Form GST CMP-OBs filed on quarterly basis. Therefore, to nullify the undue credit, the excess amount credited to negative liability statement has to be debited. In case where the amount so credited in negative liability statement, has been utilised; the recovery of amount so utilised is being done by debiting the amount in cash ledger. If sufficient balance is not available in cash ledger, the negative balance in cash ledger shall be adjusted out of the amount deposited through cha/Ian.

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-0 7.

Inconvenience caused is regretted. Team GSTN.

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