The introduction of the composition scheme was to make calculation of tax liability and compliance easier for small, micro and medium businesses. Based on business turnover, taxpayers who have registered under the composition scheme must pay taxes at the prescribed rates and file annual return in form GSTR-4. It is optional for taxpayers to opt for this scheme and pay tax at a prescribed percentage of their turnover every quarter instead of paying tax at normal rates every month and filing returns every quarter.
The businesses registered under the composition scheme have to file GST CMP 08 quarterly return by the 18th of the month following the quarter for which the tax is due. The due date for filing GSTR-4 annual return is 30th April of the relevant financial year.
Calculation of Tax Liability in GSTR-4
GSTR-4 annual return consists of 9 main tables. The main steps involved in the calculation of tax liability and filing of the return are detailed below:
- Step 1: It involves tables1 to 3: Taxpayers login to the GST portal with valid credentials and enter relevant fields like financial year, aggregate turnover of previous financial year, etc. Details like GSTIN, name of taxpayer, PAN are auto-filled from the GST portal. If the business has registered during the current financial year or has nil aggregate turnover, they have to enter 0 (zero). Only amount after saving aggregate turnover other buttons will be enabled.
- Step 2- This step involves table 4 comprising of Inward supplies including supplies on which tax is to be paid on reverse charge. The values are auto populated in tables 4A and 4B based on input by supplier in GSTR-1 and GSTR-5. The details have to be verified and edited if necessary. The summary can also be downloaded in excel format in the option ‘download summary of table 4A & 4B’. There is also a help option for users who need help related to this section.
- 4A pertains to inward supplies received from a registered supplier other than supplies attracting reverse charge.
- 4B pertains to inward supplies received from a registered supplier attracting reverse charge
- 4C pertains to inward supplies received from unregistered suppliers
- 4D refers to import of service.
- Step-3: This step involves table 5 which is auto populated and contains the summary of self-assessed liability as per form CMP-08 (Net of advances, credit and debit notes, etc.) Here any other adjustment due to amendments to details of inward supplies related to returns of earlier tax periods earlier furnished in table 4 and their subsequent modifications can be shown.
- Step-4: This step involves table 6 comprising of tax rate wise details of outward supplies/ inward supplies attracting reverse charge during the year (Net of advances, credit and debit notes and any other adjustment due to amendment etc.) When the ‘Proceed to file’ button is clicked, the data from tables 4B, 4C and 4D will get auto-populated in Table 6 with inward supplies attracting reverse charge rate wise in row 1-11.
- Step-5: This step involves table 7 contains TDS/TCS credit received. These amounts are auto-populated from the returns/statements filed by TDS/TCS taxpayers. The TDS/TCS credit received will be populated based on the amount accepted and credited to the electronic cash ledger during the financial year. The details contained in table 7 cannot be edited. Next user has to click on compute liabilities button and then the refresh button.
- Step-6: Involves table 8 comprising of the tax, interest, late fee payable and paid.
Read More: Eligibility Criteria for Filing GSTR-4
Net liability is calculated as tax payable (on inward supplies related to reverse charge, as reported in table 4B, 4C, and 4D, and outward supplies as reported in table 6 minus tax amount already paid through filed CMP-08 as shown in table 5 minus adjustment of negative liability (excess amount deposited through CMP-08)
- Step -7: Involves discharge of Liability, Additional cash required column’ reflects the cash required to be paid through challan for payment of tax, interest and late fees, after adjusting the amount available in electronic cash ledger.
In case of any interest liability, it is shown in ‘interest payable’ column.
If the form GSTR-4 is not filed before the due date, the GST portal calculates the late fee at the prescribed rates as per GST law and the same is shown in ‘late fee payable’ column.
- Step-8: Payment of Tax: Challan for payment of outstanding liability can be created by clicking on the ‘create challan’ button. The create challan page is displayed. In the tax payment grid, the total challan amount field and total challan amount in words field are auto-populated with the amount of outstanding liability for which payment is to be made. This amount cannot be edited. After the challan is generated and payment can be made.
- Step-9: The next step is to download GSTR-4 summary (pdf or excel). The taxpayer can download the summary of the return and review the values in different sections before filing the annual return. After selecting the declaration checkbox and authorized signatory checkbox from the dropdown list, the taxpayer has to click on file GSTR-4 button.
- Step-10: Then the file return page is displayed. Taxpayer has to click ‘file with DSC’ or ‘file with EVC’ button. After clicking the same, the success message and ARN is displayed. The status of form GSTR-4 annual return is changed to ‘filed’. Then the ‘GSTR-4 SUMMARY’ can be downloaded either in pdf or excel format.
This completes the process of calculation of tax liability in and filing the annual return GSTR-4 for the composite taxpayer.
Frequently Asked Questions
- What is the reason for negative liability in GSTR-4?
Answer: When taxpayers do not enter liability in table 6 of GSTR-4 , that is no liability is declared, but they have paid the tax through form CMP-08 which gets auto-populated in table 5 of GSTR-4, then negative liability appears in GSTR-4.
- How to rectify or nullify negative liability in GSTR-4?
Answer: If values were not entered in GSTR-4 by oversight, a ticket to nullify the amount can be raised in the negative liability statement. If there is no liability to be paid during the year, the excess amount already paid through CMP-08 can be utilized to pay liabilities of future tax periods.
Related Read: GSTR-4 Meaning & Applicability
Accurate calculation of tax liability is important in order to avoid penalties and ensure compliance. Taxpayers registered under the composition scheme must pay tax at a designated rate on their total sales. They have to pay tax on reverse charge on B2B transactions, on purchases from unregistered suppliers if applicable and also on imported services. The main advantage of opting for the composition scheme is simpler tax computation, quarterly payment of tax and lower rate of taxes ensuring timely compliance. The simpler compliance helps businesses to concentrate on growth of the business while improving financial flexibility due to controlled tax liability.