Intimation of difference in ITC available (GSTR-2B) and ITC claimed (GSTR-3B)
Understanding the Return Compliance in Form DRC-01C
Automated Intimation with Form GST DRC-01C:
The GST Network (GSTN) has introduced a new feature to streamline the process of addressing discrepancies in Input Tax Credit. This comes in the form of an automated intimation known as Form GST DRC-01C.
Its purpose is to allow taxpayers to explain the variations between the ITC available in the GSTR-2B statement and the ITC claimed in the GSTR-3B return.
Comparison of ITC in GSTR-3B and GSTR-2B:
The system compares the ITC declared in your GSTR-3B (Monthly/Quarterly) with the ITC available in GSTR-2B (monthly or quarterly) for each return period. If the claimed ITC in GSTR-3B exceeds a predetermined limit or the percentage difference surpasses a configurable threshold an intimation in the form of DRC-01C will be sent by department.
Applicability:
Form DRC-01C is applicable to various types of taxpayers, including regular taxpayers (including SEZ units and SEZ developers), casual taxpayers, and taxpayers who have opted out of the composition scheme.
Method to intimate about DRC-01C:
Once the intimation in Form DRC-01C Part A is generated, a Reference Number will be assigned. You will receive the intimation via email and SMS, which will include the Reference Number.
You can also check this intimation on GST Portal. Navigate to Services > Returns > Return Compliance > ITC Mismatch DRC-01C.
Action Required Upon Intimation:
Upon receiving the intimation, it is crucial to take prompt action. You need to file a response using Form DRC-01C Part B.
Either providing details of the payment made to settle the difference using Form DRC-03 Or you can give an explanation for the difference if it is genuine difference and not lead to any payment.
You can also opt for combination of the above, i.e., partly pay the difference liability and for another part explain reason of difference.
1. Through Payment of Exceeding amount of difference in ITC via DRC-03
2. By providing proper explanation with sufficient evidence to justify it to be a genuine claim.
Consequences of Non-Compliance:
If impacted taxpayers fail to file a response in Form DRC-01C Part B, they will face restrictions. Specifically, they won't be able to file their subsequent period GSTR-1/IFF, which can potentially impact their business operations.
In essence, these changes aim to enhance the accuracy and transparency of the GST system. It's important for taxpayers to be aware of these developments and take the necessary steps to comply with the new procedures, ensuring a smooth continuation of their business activities.
The Time Limit for Replying To DRC-01C:
The time limit to respond to intimation is set to be seven days from the date of intimation. So, if a taxpayer wishes to pay the demanded tax with interest, they should deposit the amount in form DRC-03 and also respond confirming payment of tax in Part-B of DRC-01C within seven days.
After filing the reply for DRC-01C Part B, you can instantly file GSTR-1/IFF.
Reasons for Mismatches between GSTR-2B and GSTR-3B
• The supplier has wrongly furnished the figures (clerical error), error in reporting of transaction inter-state transactions as intra-state or vice versa and according GSTR-3B figures are not match with GSTR-2B .
• Input tax credit not claimed in previous tax periods even it is reflected in GSTR-2B for not receiving purchased goods or services or any other resons.
• In case of ITC reversals of previous period reclaimed in current period.
• The taxpayer files GSTR-3B with incorrect details and amends details in the next tax period (for typographical errors, wrong tax rates, etc.).
What we need to take care during filling GSTR-3B to avoid such mismatch intimation?
It is preferred to perform regular reconciliation of GSTR-2B with the ITC entries being reported in GSTR-3B and purchase register/books of accounts, before the return is filed.
The reconciliation should be done on regular monthly So that, if the business receives any intimation in DRC-01C, we can respond with the relevant reasons for a genuine ITC difference immediately.
For access FAQs on Return Compliance in Form DRC-01C, click on link below:
return_compliance_itc_mismatch_intimation_in_form_gst_drc_01c.pdf
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