IMPORTANT INFORMATION FOR COMPOSITION DEALERS

This problem is being faced by every composition dealer who made the mistake in filing their GSTR 4 (Annual return) for Fy 2020-21.
while filing GSTR 4 , for Fy 2020-21 you have Not report the Tax liability in table 6 of GSTR 4 , so the tax deposited for the period (2020-21) will be transferred to Negative Liability Statement.
So those who have not reported the liability in table 6 of GSTR 4 , the liability declare for the year assumed to be NIL & the tax deposited for that year is get transferred to your Negative Liability Statement.

Thus it is adjusting your Qtr liability from Negative Liability Statement.
So it is better to compute your liability manually & generate the cash challan for the same then set-off the liability for Qtr from cash Ledger.

Note :
Those who have filed their CMP08 for current Qtr by adjusting liability from Negative Liability statement ,should pay the tax in Cash Ledger for the Qtr & file DRC 03 to setoff the same.

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:

Manually compute your correct tax liability for the year.
If your liability was not declared earlier, generate a cash challan and deposit the outstanding tax manually.
Use the DRC-03 form to adjust/set-off the liability by using the cash ledger.
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.