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Several composition taxable persons liable to file CMP-08 challan for the quarter April-June 2021 cannot submit before its due date of 18th July 2021. They faced issues due to the negative liability appearing in CMP-08 on the GST portal. This article aims at providing effective solutions for the issue and GSTN’s advisory dated 22nd July 2021.
28th May 2021
As per the outcome of the 43rd GST Council meeting and CBIC notification,
(1) Interest relief has been provided for filing of CMP-08 for Jan-March 2021 quarter as per which, for any delay, interest is not charged until 3rd May, whereas 9% of reduced interest will be charged if filing is done thereafter until 17th June, and 18% later on.
(2) The due date to file GSTR-4 for FY 2020-21 is extended up to 31st July 2021.
(3) The maximum late fee for GSTR-4 that can be charged will be restricted to Rs.500 per return for nil filing and Rs. 2000 for other than nil filing.
1st May 2021
(1) The due date to file GSTR-4 for FY 2020-21 was extended from 30th April 2021 to 31st May 2021.
(2) Form CMP-08 that was due by 18th April 2021 for January-March 2021 has been given a relaxation in the interest charges. No interest for filing on or before 8th May, interest reduced to 9% between 9th May and 23rd May, but charged at 18% thereafter.
CMP-08 is a quarterly challan-cum-statement to be submitted by the taxable composition persons. It is known as the “statement of self-assessed tax”. The statement will consolidate the turnover and tax payable details for the particular quarter and allow the taxpayer to make tax payments. The due date to file CMP-08 is the 18th of the month following the relevant quarter, and any delay will attract interest for the period of delay at 18% p.a. For instance, the CMP-08 filing is due on or before 18th July 2021.
It contains four tables as follows:
GSTR-4 is the annual return filed by all the composition taxable persons on or before 30th April following a particular financial year. For instance, GSTR-4 for FY 2020-21 is due on or before 30th April 2021*.
It contains a yearly consolidated summary of turnover of the financial year, tax liability, and tax paid details.
It contains nine tables, listed down as follows-
* The due date was extended up to 31st July 2021.
Negative Liability Statement refers to a report available on the GST portal that shows any negative summary in 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.
To explain at length, the details of sales and purchase under reverse charge reported in the Forms CMP-08 and GSTR-4 must always be on a net basis after making certain adjustments, if any, for every period. The gross values should be adjusted for any advances received credit and debit notes, as well as any subsequent amendments due to rectifications in invoices. The relevant tables for reporting in this manner are Table 5 and Table 6 of GSTR-4 and Table 3 of CMP-08.
Due to this provision, sometimes the net value in these tables turns out to be negative after such adjustments. In such cases, the total tax payable becomes negative in CMP-08. It should be carried forward without any revisions for utilisation in the subsequent tax periods, available across the financial years. Thus, the adjustment of any negative amount brought forward from earlier periods has the effect of reducing or nullifying the tax liability of the current period.
However, in the most common scenario, where Table 6 of GSTR-4 of a particular financial year is not reported by the taxpayer while filing, this issue can occur. Note that the GST portal considers tax payable or liability from Table 6, whereas the tax paid from Table 5 is auto-populated from CMP-08 forms.
Hence, if Table 6 is not reported, then there is nil liability against which tax is found to be paid, considering it as excess tax paid to the government. Therefore, the GST portal automatically carries forward such excess tax paid as a negative liability to the first quarter of next year for adjustment. In other words, the difference in tax value between Table 5 and Table 6 of GSTR-4 of FY 2020-21 will become the negative liability for FY 2021-22.
Suppose such negative liability is higher than the tax liability of the first quarter of the current year. In that case, there is no tax payable, which is known as adjustment of negative liability for the taxpayers. The same has been illustrated in the screengrab of a filed GSTR-4 for FY 2020-21, as shown below-
The Negative Liability Statement can be accessed on the GST portal after logging into the portal. The user should navigate to “Services” > Select “Ledgers” and thereafter click on the “Negative Liability Statement” button.
Many composition taxable persons have already filed GSTR-4 for FY 2020-21. In the form, only Table 5 and tax payable and paid in Table 8 are auto-populated from the four CMP-08 statements filed during that financial year. Tables such as Table 4, 7, interest and late fee in Table 8, and Table 9 have to be reported only if present. That leaves us with Table 6 which must be filled up by the taxpayer with supply type as outward or inward under reverse charge, value and tax rate. While filling up the form, a few of them have missed reporting in Table 6 of GSTR-4 for FY 2020-21 and FY 2019-20.
The omission has caused the GST portal to consider it as a negative liability to be carried forward to subsequent periods. In other words, the portal does not consider the tax liability reported through the CMP-08 summary auto-populated into GSTR-4.
While filing CMP-08 for the first quarter of FY 2021-22, the negative liability was brought forward from last year and offset against the tax liability for the first quarter of the current year. It has left the taxpayers inconvenienced and unable to file CMP-08 accurately with tax payment.
Given that GSTR-4 or CMP-08 cannot be revised once filed, it is causing a huge problem to taxpayers who genuinely missed reporting Table 6 in GSTR-4.
The GST Network (GSTN) has issued an advisory on 22nd July 2021 on this matter. The taxpayers who omitted to declare details in Table 6 of the GSTR-4 of FY 2020-21 or FY 2019-20 may raise a ticket and nullify the amount in the negative liability statement.
As an alternative, the taxpayer could also consider the following solutions mentioned below. The solution varies with the scenario on hand as follows:
1. Where the GSTR-4 of FY 2020-21 is yet to be filed
In this case, if the taxpayer had reported Table 6 of GSTR-4 for the previous year 2019-20, there are no implications in the current year FY 2021-22. He must only ensure that Table 6 of GSTR-4 is reported while filing GSTR-4 for FY 2020-21.
On the other hand, if the taxpayer had not reported Table 6 of GSTR-4 for FY 2019-20, there is an impact of the same in the present year FY 2021-22. The negative liability gets reflected for adjustment while preparing the CMP-08. In this case, while filing GSTR-4 for FY 2020-21, the taxpayer should just add the turnover of FY 2019-20 with FY 2020-21 while reporting Table 6 of GSTR-4 of FY 2020-21 – GST-rate wise summary of tax liability for the FY. This will nullify the negative liability effect due to the non-reporting of Table 6 in GSTR-4 for FY 2019-20.
In either of the scenarios, taxpayers can file CMP-08 by paying taxes without worrying about negative liability any longer.
2. Where the GSTR-4 of FY 2020-21 has already been filed
In this case, since the GSTR-4 for FY 2020-21 is already filed, there is no scope for revision there. Also, the Negative Liability Adjustment cannot be edited while submitting the CMP-08, so the taxpayer should file CMP-08 as it is with adjustment of negative liability.
So as a first step, the taxpayer can use the DRC-03 form to make a payment towards the tax liability of that current quarter that is offset or adjusted with the negative liability of previous years. He must select the reason for voluntary payment using DRC-03 as ‘Others’, financial year as 2021-22 and mention the reason as “CMP-08 short payment due to technical issues”. He can replicate this step for every quarter where such Negative Liability Adjustment from last year continues in the present financial year.
As a second step, he must report the turnover of FY 2019-20 or FY 2020-21 as the case may be along with the turnover of FY 2021-22 in Table 6 of GSTR-4 for FY 2021-22 as an addition. This way, he will nullify the effect of tax payments made using form DRC-03 during the same financial year. Additionally, he will avoid any interest liability on the tax liability for relevant quarters of the financial year.