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57. Case Study 13: Annual Return and Reconciliation for FY 2025-26

57.1 Facts

Mehta Polymers Pvt. Ltd., Vadodara, Gujarat, makes plastic compounds at 18%. It has a branch in Maharashtra. Its aggregate turnover for FY 2025-26 is above Rs. 5 crore, so it files GSTR-9 and the self-certified GSTR-9C by 31 December 2026. The reconciliation was done in October 2026. Revenue from operations in the audited accounts is Rs. 42,50,00,000.

57.2 Issues

Bridge from books to turnover in GSTR-9.
Items in GSTR-9C, and additional liability through DRC-03.
Credit missed after the section 16(4) cut-off.

57.3 Analysis and computation

Revenue from operations as per audited accounts	Rs. 42,50,00,000
Add: stock transfers to Maharashtra branch	Rs. 3,20,00,000
Add: financial credit notes deducted in books, GST not reduced	Rs. 40,00,000
Add: scrap sales shown in other income	Rs. 25,00,000
Add: sale value of machinery sold	Rs. 30,00,000
Less: export incentives in revenue, not a supply	Rs. 15,00,000
Turnover liable to GST as reconciled	Rs. 46,50,00,000
Less: invoice of 30 March 2026 missed in GSTR-1 and GSTR-3B	Rs. 18,00,000
Turnover declared in returns for FY 2025-26	Rs. 46,32,00,000

Each line has a reason. Stock transfers are supplies to a distinct person but are not revenue. Financial credit notes issued as post-sale discounts reduce revenue in the books but do not reduce the value for GST, because the discount was not agreed before the supply and linked to invoices; the Finance Act, 2026 change to section 15(3)(b) is not yet notified. Scrap and a used machine are taxable supplies booked outside revenue. Export incentives are not consideration for any supply.

Illustration 226: Additional liability paid through DRC-03

Step 1: Missed invoice: 18,00,000 x 9% = CGST Rs. 1,62,000, SGST Rs. 1,62,000.

Step 2: Interest under section 50(1) from 21 April 2026 (the day after the March return was due) to 15 October 2026: 178 days. CGST interest = 1,62,000 x 18% x 178 / 365 = Rs. 14,220; SGST the same.

Step 3: Credit on a club membership for directors was taken in the June 2025 return filed on 20 July 2025: CGST Rs. 60,000 and SGST Rs. 60,000, blocked by section 17(5)(b). It was utilised, so interest under section 50(3) runs to 15 October 2026: 452 days. Interest per head = Rs. 13,374.

Step 4: DRC-03 on 15 October 2026: tax Rs. 4,44,000, interest Rs. 55,188, total Rs. 4,99,188. Both items are disclosed in GSTR-9 (the missed supply with the outward supplies and the blocked credit as a reversal in Table 7), and the DRC-03 challan is kept in the working file.

On the credit side, Table 8 of GSTR-9 compares credit in GSTR-2B with credit taken.

8A: ITC as per GSTR-2B for FY 2025-26	Rs. 5,60,00,000
8B: ITC availed in GSTR-3B for the year	Rs. 5,42,00,000
8C: ITC of the year availed in April to November 2026	Rs. 6,00,000
8D: difference (8A less 8B less 8C)	Rs. 12,00,000

The difference of Rs. 12,00,000 is explained, and each part should be listed in the working file:

Rs. 7,00,000 blocked credit not taken (car hire, staff welfare): correctly not claimed.
Rs. 4,10,000 charged by a supplier as IGST where the supply was intra-State: the recipient cannot take it; the supplier must correct through a credit note and fresh invoice.
Rs. 90,000 IGST on an invoice of 15 February 2026 found on 10 December 2026, after the 30 November 2026 cut-off in section 16(4). The credit is lost.

Key point

Lessons

Section 16(4) closes on 30 November or on the date of filing the annual return, whichever is earlier. Filing GSTR-9 early can shut the window sooner.

Run the GSTR-2B to books reconciliation for the whole year in October, not in December.

GSTR-9 cannot be used to claim credit missed during the year; it only reports it.

57.4 Compliance and documentation

GSTR-9 and GSTR-9C by 31 December 2026. GSTR-9C reconciles turnover, tax paid and credit as per audited accounts with GSTR-9 and is self-certified.
Late fee for GSTR-9 at Rs. 200 per day (CGST and SGST together) for turnover above Rs. 20 crore, capped at 0.5% of turnover.
Amendments of FY 2025-26 made in returns up to the cut-off are shown in Tables 10 to 13.
Working file: bridge statement, list of DRC-03 payments, Table 8D explanation and the supplier correction letter.

Chapter summary

• Books revenue of Rs. 42,50,00,000 bridges to GST turnover of Rs. 46,50,00,000.

• Stock transfers, scrap, asset sales and financial credit notes are the usual bridge items.

• The missed invoice and the blocked credit were paid through DRC-03 with interest before filing.

• Credit found after 30 November is lost; the reconciliation must be done earlier.