DRC-01B (Rule 88C) : GSTR-3B vs GSTR-1 Mismatch in Liability

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Rule 88C has been added to the CGST Rules 2017 vide GST Notification No 26/2022 to implement decisions taken by 48th GST Council Meeting. The Rule 88C specifies manner of dealing with difference in liability reported in statement of outward supplies and that reported in return.

What is Rule 88C under GST?

Section 75(12) of the CGST Act, 2017 allows for recovery of tax without the issuance of a Show Cause Notice under Section 73/74 of the CGST Act, 2017 where any amount of tax is self-assessed in accordance with the return furnished under Section 39 of the CGST Act, 2017.

An explanation was added to the said sub-section by Finance Act, 2021 wherein the expression “self-assessed tax” included tax payable in respect of details of outward supplies furnished under section 37 (GSTR-1), but not included in the return furnished under section 39 (GSTR-3B). The said explanation was made effective from 01st January 2023.

There were many doubts raised by trade and the field formations about how the recovery on account of the mismatches between GSTR-1 and GSTR-3B would be dealt with by the Tax Authorities. On 7th January 2022, CBIC issued guidelines for recovery proceedings under the provisions of Section 79 of the CGST Act, 2017.

It instructed for providing of opportunity to the affected taxpayer to explain the differences between GSTR-1 and GSTR-3B by sending a letter, before initiation of action under Section 79 of the CGST Act, 2017. To standardize the entire recovery proceedings, Rule 88C has been inserted in the CGST Rules, 2017.

The Rule 88C has been explained further in detail below:

1. Rule 88C Applicability

This provision will be applicable where tax liability as per GSTR-1 / IFF exceeds tax paid in GSTR-3B by such amount and such percentage as may be prescribed by the council. Such mismatches will be considered under the provisions of Rule 88C.

2. Intimation to Taxpayer

The registered person will be intimated of such difference in Part A of FORM GST DRC-01B.
FORM GST DRC-01B would be uploaded on the common portal, and a copy of such intimation shall also be sent to his e-mail address as provided in his registration certificate. The said form would highlight the difference between GSTR-1 and GSTR-3B.

3. Action required by taxpayer

The taxpayer shall have either of the two options to deal with FORM GST DRC-01B.
Pay the differential tax liability, as specified in Part A of FORM GST DRC-01B, fully or partially, along with interest under section 50, through FORM GST DRC-03 and furnish the details thereof in Part B of FORM GST DRC-01B electronically on the common portal; or
Furnish a reply electronically on the common portal, incorporating reasons in respect of that part of the differential tax liability that has remained unpaid, if any, in Part B of FORM GST DRC-01B.

4. Time Limit:

The time limit that has been prescribed for a taxpayer to take any action in response to form DRC-01B is 7 days.

5. Consequence of non-compliance of Rule 88C

In the case where the amount specified in DRC-01B remains unpaid, or no reply was furnished, or where the reply furnished was found to be unacceptable by the proper officer, recovery proceedings would be initiated by provisions of Section 79 of the CGST Act, 2017.

Section 79 of the Central Goods and Services Tax states that, notwithstanding anything contained in the Code of Criminal Procedure, 1973, the proper officer may file an application to the appropriate Magistrate and such Magistrate shall proceed to recover from such person the amount specified thereunder as if it were a fine imposed by him.

6. Blockage of further filing of GSTR-1

Rule 59(6) of the CGST Act, 2017 also got inserted vide GST Notification No. 26/2022 -Central Tax dated 26th December 2022. The said rule does not allow the filing of GSTR-1/IFF for a subsequent tax period where after the issuance of DRC-01B the taxpayer fails to take any action. That is where the taxpayer neither

Pays amount payable as per DRC-01B nor
Submits any reply for any amount remaining unpaid in Part B of FORM GST DRC-01B

Kindly note that the rule does not prescribe blocking of GSTR-1 / IFF where the reply furnished was found to be non-satisfactory by the tax authorities. Where the reply was furnished but found to be not satisfactory, only recovery proceedings under Section 79 of the CGST Act, 2017 would be triggered.

Where no action was taken against the issuance of DRC-01B, there would be blocking of GSTR-1/IFF along with initiation of recovery proceedings under Section 79 of the CGST Act, 2017.

GSTR 1 and GSTR 3B are the two most important returns in the GST system. Comparing GSTR-3B with GSTR-1 is a much-needed process to be undertaken by every taxpayer in order to ensure that there are no variations or gaps, which could, in turn, lead to a demand notice from the tax authorities or unwanted issues that may arise and hinder the accurate filing of the annual returns.

Reasons for the mismatch in GSTR 1 and GSTR 3B in liability

1. RCM Supplies: Interstate supplies made to unregistered persons not declared in GSTR- 3B.

2. Misallocation: GSTR-1 is prepared at the invoice level and GSTR-3B is prepared at the aggregate level. This can lead to furnishing supplies under the wrong head in GSTR-3B, but declaring the same details correctly in GSTR-1.

3. Wrong tax heads: The total value of supplies is correctly shown but taxes are paid under the wrong head.

4. Post-filing Amendments: Amendment in supplies made after GSTR-1 filed.

5 .Tax not paid in GSTR 3B on supplies: There have been multiple instances of ITC being passed on by the supplier vide GST-R1 for which tax have not been discharged through GSTR 3B.

6. Different filing periods: The time difference in reporting time of invoices in GSTR-1 and GSTR-3B.

More details

https://tutorial.gst.gov.in/downloads/news/return_compliance_in_form_drc_01b.pdf

FORM GST DRC-01B

[See rule 88C]

PART-A (System Generated)

Intimation of difference in liability reported in statement of outward supplies and that reported in return

Ref No:	Date:

GSTIN:
Legal Name:

1. it is noticed that the tax payable by you, in accordance with the statement of outward supplies furnished by you in FORM GSTR-1 or using the invoice furnishing facility, exceeds the amount of tax paid by you in accordance with the return furnished in FORM GSTR-3B for the period<from><to> by an amount of Rs............. The details thereof are as follows:

Form Type	Liability declared/ paid (in Rs.)
Form Type	IGST	CGST	SGST/UTGST	Cess	Total
FORM GSTR-1 / IFF
FORM GSTR-3B
Difference in liability

2. in accordance with sub-rule (1) of rule 88C, you are hereby requested to either pay the said differential tax liability, along with interest under section 50, through FORM GST DRC-03 and furnish the details thereof in Part-B of FORM GST DRC-01B, and/or furnish the reply in Part-B of FORM GST DRC-01B incorporating reasons in respect of that part of the differential tax liability that has remained unpaid, within a period of seven days.

3. it may be noted that where any amount remains unpaid within a period of seven days and where no explanation or reason is furnished by you or where the explanation or reason furnished by you is not found to be acceptable by the proper officer, the said amount shall be recoverable in accordance with the provisions of section 79 of the Act.

4. This is a system generated notice and does not require signature.

PART-B

Reply by Taxpayer in respect of the intimation of difference in liability

Reference No. of intimation:

Date:

A. i have paid the amount of the differential tax liability, as specified in Part A of FORM GST DRC-01B, fully or partially, along with interest under section 50, through FORM GST DRC-03, and the details thereof are as below:

ARN of FORM GST DRC-03	Paid Under Head	Tax Period	IGST	CGST	SGST/UTGST	CESS

AND/OR

B. The reasons in respect of that part of the differential tax liability that has remained unpaid, are as under:

S. No.	Brief Reasons for Difference	Details (Mandatory)
1	Excess Liability paid in earlier tax periods in FORM GSTR-3B
2	Some transactions of earlier tax period which could not be declared in the FORM GSTR-1/IFF of the said tax period but in respect of which tax has already been paid in FORM GSTR-3B of the said tax period and which have now been declared in FORM GSTR-1/IFF of the tax period under consideration
3	FORM GSTR-1/IFF filed with incorrect details and will be amended in next tax period (including typographical errors, wrong tax rates, etc.)
4	Mistake in reporting of advances received and adjusted against invoices
5	Any other reasons

Verification

I __________________________________________________ hereby solemnly affirm and declare that the information given hereinabove is true and correct to the best of my knowledge and belief and nothing has been concealed therefrom.

	Signature of Authorised Signatory
	Name:
	Designation/Status:
Place:
Date:

-----------------------------------------------------

By GST Info Tamil

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