IMPORTANT INFORMATION FOR COMPOSITION DEALERS

Thanks for sharing this, Pankaj!

To summarize for Composition Scheme taxpayers:

• If you did not report tax liability in Table 6 of GSTR-4 Annual Return (FY 2020-21), then the system treats your annual tax liability as NIL.

• The tax already deposited for that year goes to the Negative Liability Statement (NLS).

• When you file quarterly returns or CMP-08, the system adjusts your current quarter's tax liability against this negative liability (which is basically your earlier excess tax deposit).

• This can lead to mismatches if not tracked properly.

What to do:

1. Manually compute your correct tax liability for the year.

2. If your liability was not declared earlier, generate a cash challan and deposit the outstanding tax manually.

3. Use the DRC-03 form to adjust/set-off the liability by using the cash ledger.

4. For those who already adjusted liability through NLS in CMP-08, it is advisable to pay the tax in cash ledger and file DRC-03 to clear the mismatch.

This is a very important caution for composition dealers to avoid future notices and reconcile their GST accounts properly.