Negative Output in IGST to setoff against CGST and SGST

[Arya Ram]

We have negative CGST and SGST output in GSTR-1 of 3,61,740. We are unable to set off this in GSTR-3B. Is there a way to setoff the ITC

[Sadanand Bulbule]

Refer Section 49[5] of the CGST Act for better understanding of segment-wise utilisation of ITC under respective Acts. 

[Shilpi Jain]

How have you got this negative output liability in GSTR-1?

Did this autopopulate in GSTR-3B?

[YAGAY andSUN]

A negative output liability in GSTR-1 for CGST and SGST, amounting to ₹3,61,740, usually arises when previously reported invoices are amended or credit notes are issued to customers for returns, discounts, or corrections. This results in a reduction of the outward tax liability. GSTR-1 captures these adjustments accurately and may reflect a negative figure. However, GSTR-3B does not allow for negative liability to be carried forward or offset directly, as it only permits the entry of positive values under outward tax liability. If the adjustment has not been manually accounted for in GSTR-3B, it will not auto-populate from GSTR-1, leading to a mismatch.

Section 49(5) of the CGST Act prescribes the order of utilization of ITC across various tax heads—IGST is to be used first, followed by CGST and SGST in a specific manner. However, these rules pertain to utilization of available input credit for payment of tax and do not govern adjustments of negative output liability reported in GSTR-1. Therefore, this negative liability cannot be set off against ITC in the manner envisaged under Section 49(5).

If GSTR-3B for the relevant period is yet to be filed, the taxpayer can adjust the taxable values or tax amounts manually in Table 3.1(a) to account for credit notes or invoice corrections, ensuring that the net liability reflects the true position. In case GSTR-3B has already been filed, the excess tax paid due to unadjusted output may be claimed as refund under the “excess payment of tax” category using Form RFD-01. Alternatively, the adjustment may be carried forward and reduced from future outward tax liability, subject to departmental acceptance during reconciliation. Proper documentation, along with audit trail explaining the system errors and subsequent correction, would be critical in defending the position during scrutiny.

AI Summary

Tax Professional Faces Complex Input Tax Credit Challenge with Rs. 3,61,740 Negative Output Liability Under Section 49(5) A tax professional encountered a negative output liability of Rs. 3,61,740 in GSTR-1 for CGST and SGST, which cannot be directly set off in GSTR-3B. The negative output typically results from invoice amendments, credit notes, or returns. While Section 49(5) of CGST Act governs Input Tax Credit utilization, it does not resolve this specific issue. Potential solutions include manual adjustment in GSTR-3B, filing a refund claim, or carrying forward the adjustment in future tax periods.