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Responding to GST Form DRC-01B: Addressing Discrepancies Between GSTR-1/IFF and GSTR-3B Liabilities

Form DRC-01B is an automated GST intimation for taxpayers when reported GSTR-1/IFF liability exceeds GSTR-3B tax paid. Introduced via Rule 88C of the CGST Rules, it flags discrepancies by a defined threshold. Taxpayers must respond within seven days either by paying the difference through Form DRC-03 or by explaining the variance. Failure to reply results in the blocking of subsequent GSTR-1/IFF filings, underscoring the importance of timely compliance.

📖 5 min read read🏷️ GST Returns

When a taxpayer's declared tax liability in their GSTR-1 return or Invoice Furnishing Facility (IFF) surpasses the amount settled via their GSTR-3B return by a specified threshold, they will receive an official notification, known as Part A of Form GST DRC-01B. It is compulsory for the taxpayer to respond to this notification using Part B of Form GST DRC-01B. Failure to do so will lead to the blocking of their GSTR-1/IFF filing for subsequent tax periods. This article outlines Form DRC-01B and provides a detailed procedure for submitting a response to the intimation. This process is crucial for maintaining GST compliance and ensuring uninterrupted tax operations.

Understanding Form GST DRC-01B

In December 2022, the Central Goods and Services Tax (CGST) Rules, 2017, were updated with the introduction of Rule 88C. This rule enables the automatic generation of notices to taxpayers when discrepancies are identified between their GSTR-1/IFF and GSTR-3B filings. Such notifications are issued as Part A of Form GST DRC-01B if the tax liability reported in GSTR-1/IFF surpasses the tax paid in GSTR-3B by a predetermined amount and percentage.

Taxpayers have two primary options: they can either settle the outstanding tax liability, along with applicable interest under Section 50, by submitting Form GST DRC-03 or provide an explanation for the reported differences within seven days. Regardless of the chosen action, all taxpayers must submit a response to the intimation through Part B of Form GST DRC-01B.

Non-compliance with the DRC-01B response requirement will result in the suspension of the taxpayer's GSTR-1/IFF filing ability for subsequent tax periods. This restriction remains in effect until the taxpayer either remits the amounts specified in the intimation or submits a clear explanation for the non-payment.

Guide to Responding to the DRC-01B Intimation

To submit your response to the DRC-01B intimation, follow these detailed steps:

Accessing the GST Portal

  1. Access the official GST portal by logging in with your authenticated user credentials.
  2. Navigate through ‘Services’ > ‘Returns’ > ‘Return Compliance’. Alternatively, locate and click the ‘Return Compliance’ link directly from your dashboard.

Identifying the Mismatch Intimation

  1. Upon reaching the ‘Return Compliance’ page, find the ‘Liability Mismatch (DRC-01B)’ tile and click the ‘View’ button associated with it. This action will display a list of pending records that require attention.
  2. On the ‘Liability Mismatch (DRC-01B)’ page, select the hyperlinked reference number.
    • Note: If multiple reference numbers are visible, you can utilize the ‘Reference number’, ‘Return period’, or ‘Status’ filters to pinpoint the specific DRC-01B intimation you need to address.
    • By Reference Number: Input the Acknowledgement Reference Number (ARN) and click ‘Search’ to retrieve both completed and pending records. Then, click on the relevant record.
    • By Return Period: Choose the appropriate financial year and return period from the dropdown menus. Once selected, click ‘Search’ to view all records. You can only file Form DRC-01B for records marked as 'pending'.
    • By Status: Select ‘Pending’ or ‘Completed’ from the status dropdown and click ‘Search’. Only pending records are eligible for filing Form DRC-01B.

Understanding Form Parts A and B

The ‘Liability Mismatch (DRC-01B)’ page is divided into two main sections:

  • Part A: This section is the ‘Intimation of Difference in Liability Reported in Statement of Outward Supplies and that Reported in Return’.
  • Part B: This section is the ‘Reply by Taxpayer in Respect of the Intimation of Difference in Liability’.

You have the option to download Part A of Form DRC-01B as a system-generated PDF for your records by clicking the ‘Download DRC-01B Part A’ button.

Submitting Your Reply in Part B

  1. Part B is further divided into two sub-parts. In sub-part 1, accurately enter the ARN of any payment made using Form DRC-03 for the period for which the DRC-01B intimation was issued. After entry, click ‘Validate’. This will present a summary of the payment details submitted via DRC-03 to cover the differential amount.
    • Important Checkpoints for ARN Validation: If an error message regarding an incorrect ARN appears, ensure the following:
      • The ARN is valid and linked to the correct DRC-03 and GSTIN.
      • The payment's cause in DRC-03 is specified as ‘Liability mismatch - GSTR-1 to GSTR-3B’.
      • DRC-03 was filed on or after the issuance date of Part A of DRC-01B.
      • The overall tax period matches the period for which Part A of DRC-01B was issued. For monthly filers, both ‘From’ and ‘To’ dates must be identical. For quarterly filers, it must encompass at least one month within the relevant quarter.
    • Note: You can complete Part B of DRC-01B by either providing the ARN in sub-part 1, offering an explanation in sub-part 2, or using a combination of both. Entering the DRC-03 ARN is not strictly mandatory for filing the form.
  2. If payment has not been made and you wish to proceed, you can click on the ‘Click Here for DRC-03’ button.
  3. In sub-part 2, you can select the specific reason for the liability difference by checking the relevant box and providing further details in the text area. If none of the listed reasons apply, select ‘Any other reasons’ and explain your situation in up to 500 characters.
    • Note: If a reason is selected but no explanation is provided, an error message will appear.
  4. Once all necessary details are entered, click the ‘Save’ button. A success message will confirm that your details have been saved.

Review and Final Submission

  1. Before final submission, it is crucial to preview Form DRC-01B. Download the draft order by clicking the ‘Download DRC-01B’ button and meticulously verify its contents for any discrepancies.
  2. At the bottom of the page, check the declaration box. From the dropdown list, select the name of the authorized signatory and specify the place.
    • Note: The declaration checkbox becomes active only after saving details in either sub-part one and/or two of Part B of DRC-01B.
  3. Click the ‘File GST DRC-01B’ button. This button will activate once the authorized signatory is chosen and the place is entered; the designation and date will auto-populate.
  4. A warning message will appear; click ‘Proceed’ to continue.
  5. Choose to file either with EVC (Electronic Verification Code) or DSC (Digital Signature Certificate) by selecting ‘File DRC-01B with EVC’ or ‘File DRC-01B with DSC’. For EVC, enter the OTP sent to the registered email ID and mobile number of the primary authorized signatory on the GST portal, then click ‘Verify’. A success message will confirm completion.

Verifying Status

  1. To check the status of your submitted Form DRC-01B, revisit the ‘Status’ option as described in Step 4. Click on the reference number hyperlink to view the completed form. You can also download the final PDF by clicking the ‘Download DRC-01B’ button.

Frequently Asked Questions

  • What is the primary purpose of GST Form DRC-01B? Form DRC-01B serves as an automated intimation to taxpayers regarding discrepancies identified between their declared outward supply liability (GSTR-1/IFF) and the actual tax paid (GSTR-3B).

  • What are the consequences of not responding to a DRC-01B intimation? Failure to respond to Form DRC-01B can lead to the blocking of subsequent GSTR-1/IFF filings, preventing the taxpayer from furnishing their outward supply details for future periods until a response is submitted.

  • How can taxpayers resolve the liability differences highlighted in DRC-01B? Taxpayers can resolve differences either by paying the differential tax liability along with interest using Form GST DRC-03 or by submitting a detailed explanation for the discrepancy in Part B of Form DRC-01B.

  • Is there a specific timeline for filing a response to Form DRC-01B? Yes, taxpayers are generally required to respond to the intimation within seven days of its issuance, either by making the payment or providing an explanation for the reported differences.

  • Who is responsible for issuing Form DRC-01B to taxpayers? The GST system automatically generates and issues Form DRC-01B intimations to taxpayers based on mismatches detected in their filed returns, as per Rule 88C of the CGST Rules.

Frequently Asked Questions

What is the primary purpose of GST Form DRC-01B?
Form DRC-01B serves as an automated intimation to taxpayers regarding discrepancies identified between their declared outward supply liability (GSTR-1/IFF) and the actual tax paid (GSTR-3B).
What are the consequences of not responding to a DRC-01B intimation?
Failure to respond to Form DRC-01B can lead to the blocking of subsequent GSTR-1/IFF filings, preventing the taxpayer from furnishing their outward supply details for future periods until a response is submitted.
How can taxpayers resolve the liability differences highlighted in DRC-01B?
Taxpayers can resolve differences either by paying the differential tax liability along with interest using Form GST DRC-03 or by submitting a detailed explanation for the discrepancy in Part B of Form DRC-01B.
Is there a specific timeline for filing a response to Form DRC-01B?
Yes, taxpayers are generally required to respond to the intimation within seven days of its issuance, either by making the payment or providing an explanation for the reported differences.
Who is responsible for issuing Form DRC-01B to taxpayers?
The GST system automatically generates and issues Form DRC-01B intimations to taxpayers based on mismatches detected in their filed returns, as per Rule 88C of the CGST Rules.