GST DRC-01B Notice: GSTR-1 vs GSTR-3B Liability Mismatch

Source: Rule 88C, CGST Rules 2017, inserted by Notification 26/2022-CT dated 26.12.2022.

• •Tax paid through DRC-03: You realised you had underpaid tax in a prior period and made a voluntary payment through DRC-03 (voluntary tax payment challan) but the GSTR-3B still reflects the original lower figure. This is legitimate but needs to be declared in DRC-01B Part B.
• •Timing difference: You raised invoices in GSTR-1 for advance received but the actual tax was paid in the next month's GSTR-3B. Common in construction and real estate.
• •Credit notes issued: You issued credit notes in a later period that reduced your actual liability from what GSTR-1 showed for the current period. This is not always reflected correctly in the system comparison.
• •Amendment in GSTR-1: You amended invoices in a subsequent month but the original period's comparison is being flagged.
• •Genuine underpayment: You made a mistake in GSTR-3B and actually did pay less tax than you were supposed to. In this case, you should pay the shortfall.
• •Nil-rated, exempted, or non-GST supplies declared in GSTR-1 but not in GSTR-3B: These categories can create apparent mismatches that are not actual tax dues.

• •DRC-01B Part A: This is the intimation the system sends you. It shows the specific period, the GSTR-1 declared liability, the GSTR-3B declared liability, and the difference.
• •DRC-01B Part B: This is where you reply. You must file Part B within 7 days of the Part A intimation.
• •In Part B, you select one of two responses: (a) "The difference is due to the following reasons" - you explain and provide details, or (b) "I am making payment of the difference" - you pay the shortfall.
• •If you select the explanation route, you must provide specific reasons. Vague reasons like "due to accounting treatment" are not sufficient - you need the specific transaction details.

• •If your explanation is accepted: The matter closes here. No further action.
• •If your explanation is not accepted or you do not respond: The system/officer can initiate proceedings under Section 73 or 74 and issue a DRC-01. At that stage, the mismatch becomes a formal demand with penalties.
• •If you pay the shortfall: Part B closed with payment challan number. The matter closes for that period.
• •If the same mismatch recurs across multiple months: The officer may decide to initiate a comprehensive scrutiny or audit rather than handling them individually.

A DRC-01B is significantly easier and cheaper to resolve than a DRC-01. The incentive to resolve it here is strong.

• •A clear statement of the reason for the mismatch with the specific transaction or period it relates to
• •DRC-03 challan details if the difference was paid voluntarily in a different period
• •A reconciliation table showing: GSTR-1 declared value, credit notes issued, amendments, advances adjusted, and the net taxable value matching GSTR-3B
• •Copies of relevant invoices, credit notes, or amendment records as supporting documents
• •If there was a genuine error, the payment of shortfall with interest under Section 50 (18% per annum from the original due date)