GSTR-9 & GSTR-9C for FY 2025-26: 12 High-Risk Mismatches That Invite Scrutiny Under Section 74A

As annual GST compliance for FY 2025-26 comes up, filing GSTR-9 and GSTR-9C is no longer a routine box-ticking exercise. With system-based matching, IMS-linked ITC auto-population, and cross-verification with income-tax and e-invoice data, even small gaps can escalate into Section 74A proceedings, backed by automated notices such as DRC-01B and DRC-01C.

This guide distils twelve reconciliation risk areas that frequently result in demand notices, interest under Section 50, and inquiries, and converts them into a practical, pre-filing checklist you can use before uploading GSTR-9 and GSTR-9C.

The focus is on:

  • Identifying key mismatch patterns
  • Understanding why they are high-risk from a departmental perspective
  • Laying out how to prepare reconciliations and documentation before filing

Important: For FY 2025-26, ITC in GSTR-9 is auto-populated from the Invoice Management System (IMS) as per Notification 16/2025-Central Tax. Any deviation between IMS/GSTR-2B and ITC claimed in GSTR-3B must be fully reconciled and supported with working papers.

1. Higher GSTR-1 Liability vs. Tax Paid in GSTR-3B (GSTR-9 Table 4 vs. Table 9)

If outward taxable supplies declared in GSTR-1 exceed the tax actually discharged in GSTR-3B, the system treats the full GSTR-1 liability as admitted tax. Where the payment in GSTR-3B is lower, the balance is considered admitted but unpaid.

This discrepancy gets picked up:

  • During the year via Rule 88C (DRC-01B)
  • Again at year-end through GSTR-9 reconciliation (Table 4 vs. Table 9)

What to do before filing:

  1. For every month, reconcile:
    • GSTR-1 tax liability
    • GSTR-3B tax paid
  2. Where there are timing differences (e.g., invoice shown in March GSTR-1, but tax paid in April GSTR-3B):
    • Document the reason
    • Ensure it falls within the permissible amendment window for FY 2025-26
  3. For any permanent short payment, consider voluntary payment via DRC-03 before filing GSTR-9.

Risk view: From the department’s standpoint, this is the easiest Section 74A case—liability is self-declared in GSTR-1, but not settled in GSTR-3B. Arguments are usually limited to timing or reporting errors, so prior reconciliation is crucial.

2. ITC in GSTR-3B Exceeding GSTR-2B / IMS (GSTR-9 Table 8)

Where ITC availed in GSTR-3B is higher than ITC appearing in GSTR-2B (Table 8A), the gap surfaces as a negative balance in GSTR-9 Table 8D. This is among the most aggressively monitored mismatches, now also highlighted monthly through DRC-01C under Rule 88D.

For FY 2025-26, this risk is amplified because:

  • GSTR-9 auto-populates ITC based on IMS, not just GSTR-2B
  • Any invoice kept as “pending” or “rejected” in IMS will not be reflected in the auto-populated ITC

Legitimate reasons where ITC may exceed 2B/IMS include:

  • Import IGST claimed through Bills of Entry
  • Opening balance ITC brought forward
  • TRAN credits or transition-related ITC

Action points:

  • Build a line-item reconciliation for ITC:
    • ITC as per GSTR-2B/IMS
    • ITC as per purchase register/books
    • ITC actually claimed in GSTR-3B
  • Tag differences with reason codes, for example:
    • Import IGST (link every entry to Bill of Entry and ICEGATE record)
    • Transitional credits
    • Invoices not uploaded or uploaded incorrectly by vendor
    • Invoices marked pending in IMS but credit taken
  • Prepare a DRC-03 plan where ITC is clearly ineligible or unsupported.

Key message: A gap in Table 8D is not automatically wrong, but an unexplained gap is almost certainly a problem. Documentation at the time of filing is far more persuasive than post-notice justifications.

3. QRMP & IFF Mismatches for Quarterly Filers (GSTR-9 Table 4 & Table 6)

For assessees under the QRMP scheme, outward supplies and ITC often do not reconcile neatly if IFF and quarterly returns are not mapped correctly.

Under QRMP:

  • B2B invoices reported via IFF in months 1 and 2 of a quarter
  • Quarterly GSTR-1 includes:
    • Month 3 B2B invoices
    • B2C invoices
    • Amendments, but not a repetition of IFF invoices

As a result, outward supplies for the year must be computed as:

IFF (Month 1 + Month 2 of each quarter) plus Quarterly GSTR-1

This total then needs to match:

  • Quarterly GSTR-3B
  • PMT-06 challans (for monthly payments under QRMP)

Common errors:

  • Double counting IFF invoices by adding them again from quarterly GSTR-1 view
  • Assuming quarterly GSTR-1 alone is complete and omitting IFF invoices entirely

For ITC under QRMP:

  • Recipients’ GSTR-2B is generated quarterly
  • Timing differences occur when IFF-based invoices appear in 2B in one quarter, but the assessee avails ITC in a different quarter

Pre-filing checks:

  • Prepare an annual outward supply statement combining:
    1. IFF data (all quarters)
    2. Quarterly GSTR-1
    3. All four GSTR-3B returns
  • For ITC, reconcile quarterly 2B with quarterly ITC claims in GSTR-3B, explaining any timing difference.

4. Credit Notes – Timing & Recipient Reversal Conditions (GSTR-9 Table 4I–4K)

Two distinct issues arise around credit notes:

  1. Cut-off for reduction of liability:

    • Credit notes pertaining to FY 2025-26 must be declared on or before the November 2026 GSTR-3B to reduce outward tax for that year.
    • Credit notes booked in books after the cut-off cannot reduce the GST liability for FY 2025-26.

  2. Recipient ITC reversal condition (post Budget 2025 amendment to Section 34):

    • The supplier’s reduction in liability is now contingent upon the recipient reversing the corresponding ITC.

Risk exposures:

  • Supplier claims reduction of tax through credit note, but the recipient never reverses ITC – department can deny the supplier’s reduction.
  • Recipient continues to retain ITC even though a credit note has been issued – leading to ITC demand, interest, and possible penalty.

Controls before filing: