<h1>Negative liability arises when composition payments auto-populate in annual returns and liabilities go undeclared, requiring deposit or refund.</h1> Failure to declare the year's liability in the annual composition return's liability table can convert auto-populated composition payments into a negative liability carried in the Negative Liability Statement and auto-debited for convenience; debits applied to cash ledger without prior challan deposits can create negative cash balances and must be rectified by depositing the outstanding liability through challan or, where the excess was applied to a later year, by filing a refund application in the prescribed form.