Set-Off and Carry Forward of Losses: Understanding GSTR-9 and GSTR-9C – Annual Return Filing Guide

In India’s indirect tax landscape, the Goods and Services Tax (GST) system mandates periodic filings to ensure transparency and compliance. Among these, GSTR-9 and GSTR 9C are annual return forms that summarize the financial and operational data of taxpayers for a financial year. These returns are essential not only to confirm the correctness of monthly or quarterly GST returns but also to facilitate reconciliation with audited financial statements.

This blog explains how GSTR-9 and GSTR 9C function, their relevance in the set-off and carry forward of losses, and how businesses can ensure accurate annual return filing to stay compliant.

What is GSTR-9?

GSTR-9 is an annual return that must be filed by every registered taxpayer under GST (except a few exempt categories like composition taxpayers). It consolidates data from the taxpayer’s monthly or quarterly returns (GSTR-1 and GSTR-3B) and presents a complete picture of the outward and inward supplies, tax paid, input tax credit (ITC) availed, demands, refunds, and other adjustments.

Filing GSTR-9 is important to reconcile discrepancies across periodic returns and correct any unreported liabilities or excess claims. However, the return must be filed carefully, especially when dealing with the set-off and carry forward of losses, to ensure accurate closing balances and compliance.

What is GSTR 9C?

GSTR 9C is a reconciliation statement that must be submitted by taxpayers whose annual turnover exceeds the prescribed threshold (currently ₹5 crore). It must be certified by a Chartered Accountant or Cost Accountant and includes:

• A reconciliation of the figures declared in GSTR-9 with the taxpayer’s audited annual financial statements.

• Certification by the auditor on the correctness of the returns and reconciliation.

• Reporting of any discrepancies, unreported liabilities, or excess credits.

In essence, GSTR 9C acts as an audit tool under the GST framework, aiming to catch errors and ensure compliance with GST law.

Applicability of GSTR 9C

GSTR 9C is applicable to:

• Regular taxpayers (not composition scheme taxpayers)

• Those with an annual aggregate turnover of more than ₹5 crore

• Taxpayers who are required to get their accounts audited under GST laws

It is essential to verify if GSTR 9C applies to your business and prepare the relevant financial data accordingly. Since this return involves professional certification, it carries greater scrutiny and legal accountability.

Components of GSTR 9C

The GSTR 9C form is divided into two main parts:

1. Part A – Reconciliation Statement
   This includes various tables reconciling:

   • Turnover declared in financial statements and GSTR-9

   • Tax paid as per books and as per GSTR-9

   • ITC claimed as per returns and as per books

2. Part B – Certification
   A declaration by the auditor confirming the accuracy of the information and pointing out any deviations, non-compliances, or potential risks.

The reconciliations in GSTR 9C are crucial for evaluating the set-off and carry forward of losses, ensuring that no ITC is overstated or understated, and that liabilities are matched with actual figures.

Set-Off and Carry Forward of Losses under GST

Set-off in GST refers to the adjustment of available Input Tax Credit (ITC) against output tax liability. Carry forward refers to transferring unutilized ITC or losses from one tax period to the next.

While set-off and carry forward are primarily addressed in monthly returns like GSTR-3B, these transactions must also reflect accurately in annual returns. Discrepancies in claiming or utilizing ITC could attract scrutiny during GSTR 9C reconciliation.

Common scenarios where losses and set-offs are captured include:

• Input services availed but not utilized within the financial year

• Excess ITC claimed or wrongly claimed

• Refunds pending or disallowed

During the filing of GSTR 9C, such cases need to be reconciled with audited financials to determine the correct carry forward of ITC or reversal, if needed.

Importance of Accurate GSTR 9C Filing

Filing GSTR 9C accurately has multiple benefits:

1. Avoids Legal Issues
   Since GSTR 9C is subject to certification by an external auditor, any misreporting may invite penalties under GST law or action under the Companies Act if false statements are found.

2. Supports ITC Claims
   The reconciliation ensures that only valid ITC is carried forward or set off, thereby preventing future litigation or reversal demands.

3. Clarifies Tax Position
   By matching the taxpayer’s records with GST returns, GSTR 9C validates the consistency and integrity of financial disclosures.

4. Helps Identify Errors
   Many businesses identify unnoticed errors during GSTR 9C preparation – such as underreported sales, excess ITC claims, or mismatches – which can then be corrected proactively.

Due Date and Late Fees for GSTR 9C

Typically, the due date for filing GSTR 9C is 31st December following the end of the financial year. For example, for FY 2023–24, the due date would be 31st December 2024, unless extended by the government.

There is no separate late fee for GSTR 9C, but failure to file it on time when required is considered non-compliance and may attract penal consequences. Additionally, without GSTR 9C, the annual return process is incomplete for applicable taxpayers.

Tips for Filing GSTR 9C

1. Begin Early
   Since data reconciliation and certification take time, start preparing at least 2–3 months before the deadline.

2. Use Technology
   Utilize GST reconciliation tools or ERP-based reports to simplify the matching of GST returns with financial books.

3. Consult Professionals
   Engage a qualified Chartered Accountant who understands your business and GST intricacies to handle GSTR 9C filing and certification.

4. Check Past Errors
   Look for issues like ITC reversals, incorrect GSTINs, missed outward supplies, or excess tax payments from prior months or years.

Conclusion

GSTR 9C is more than just an annual compliance requirement – it’s a comprehensive reconciliation of a business’s tax and financial positions under GST. With its emphasis on accuracy, it plays a key role in avoiding mismatches, ensuring correct set-off and carry forward of losses, and protecting businesses from future disputes.

Taxpayers who fall within its applicability should take GSTR 9C seriously and approach it with detailed preparation and professional support. Timely and correct filing of GSTR-9 and GSTR 9C not only ensures compliance but also reflects strong financial governance and tax discipline.