Mismatch in ITC in GSTR-2B/3B: Introduction of Rule 88D & DRC-01C

DRC-01C- Manner of dealing with mismatch of ITC in GSTR-2B/3B and Introduction of DRC-01C (Rule-88D)

In recent months, numerous discrepancies have arisen where more credit has been claimed in GSTR-3B than the ITC available in GSTR-2B. These mismatches have been a matter of concern, leading to the introduction of Rule-88D. This article dives into the details of the newly introduced Rule-88D, which addresses the manner of dealing with differences in input tax credit and outlines the applicable taxpayers and procedures under GST Notification 38/2023.

GSTR 2B is value reported by the supplier in his GSTR-1 under section-37 which is autogenerated in form GSTR-2B of the Recipients. In view of these differences, and earlier in spite of Rule-88C (Form DRC-01B) which is related to mismatch in liability GSTR-1 introduced vide GST notification No-26/2022-Central Tax, dated-26/12/2022. After the above rule, a new rule 88D has been introduced via notification 38/2023 Central Tax dated 04^st August 2023.

Rule-88D- Manner of dealing with difference in input tax credit available in auto-generated statement containing the details of input tax credit and that availed in return. –

Sub Section-(1) Where the amount of input tax credit availed by a registered person in the return for a tax period or periods furnished by him in FORM GSTR-3B exceeds the input tax credit  available  to  such  person  in  accordance  with  the  auto-generated  statement containing the details of input tax credit in FORM GSTR-2B in respect of the said tax period or periods, as the case may be, by such amount and such percentage, as may be recommended by the Council, the said registered person shall be intimated of such difference in Part A of FORM GST DRC-01C, electronically on the common portal, and a copy of such intimation shall also be sent to his e-mail address provided at the time of registration or as amended from time to time, highlighting the said difference and directing him to—

Then Rule-88D has been inserted by the CBIC in August 2023

This provision will be applicable where Input Tax credit availed in GSTR-3B is exceeds then the ITC available in GSTR-2B (Auto generated Statement as per Section-38) by such amount and such percentage as may be prescribed by the GST council. Such mismatches will be considered under the provisions of Rule 88D.

GSTN shall issue Intimation to Taxpayer in Form-DRC-01C.

• The registered person shall be intimated of such difference in Part A of FORM GST DRC-01C.
• FORM GST DRC-01C would be uploaded on the common portal, and a copy of such intimation shall also be sent to his e-mail address as provided at the time of  registration Registration or as amended from time to time,.
• The said form would highlight the difference between GSTR-3B and GSTR-2B.

Applicability as like Rule-88C

1. Regular Tax Payer (Monthly or QRMP)

2. SEZ Developers/Units

3. Casual Taxpayers

4. Composition Dealers

Content Available in DRC-01B

The registered person (shall

(a) pay an amount equal to the excess input tax credit availed in the said FORM GSTR-3B, along with interest payable under section 50, through FORM GST DRC-03, or

(b) explain the reasons for the aforesaid difference in input tax credit on the common portal, within a period of seven days.

Upon receipt of intimation at common portal, Taxpayer

(a) pay an amount equal to the excess input tax credit, as specified in Part A of FORM GST DRC-01C, fully or partially, along with interest payable under section 50, through FORM GST DRC-03 and furnish the details thereof in Part B of FORM GST DRC-01C, electronically on the common portal, or

(b) furnish a reply, electronically on the common portal, incorporating reasons in respect of the amount of excess input tax credit that has still remained to be paid, if any, in Part B of FORM GST DRC-01C, within a period of seven days.

Non-Compliance of Rule-88C

A registered person, to whom an intimation has been issued on common portal  under Rule-88D in respect of a tax period, as per Rule-59(6e) he shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM GSTR-1 or using the invoice furnishing facility for a subsequent tax period, unless he has either deposited the amount specified in the said intimation or has furnished a reply explaining the reasons for any amount remaining unpaid, as required under the provisions of sub-rule (2) of rule 88D.]

Recovery of Amount mentioned in DRC-01C

In cases when the taxpayer’s response is deemed to be unsatisfactory, direct recovery proceedings under Section 79 of the CGST Act, 2017 are to be executed against the taxpayer.

Section 79 of the CGST Act, 2017 permits merely for the recovery of the amount liable to be paid by the individual.” The words any amount payable” would be interpreted in context, where the same would be utilised and the liable amount to be paid (until considered) could merely reveal via executing the adjudication procedure as mentioned under Section 73 or 74 of the CGST Act 2017.

Additionally, Section 75(5) guarantees that an opportunity will be needed if a written request is made or whenever a negative decision is anticipated for the individual in question. Any demand or recovery that is raised because of a mismatch between GSTR-3B and 2B falls under this category.

Rule 88D is not yet effective.

The said rule gets triggered only where the difference between GSTR-3B and GSTR-2B would exceed a certain amount and percentage as may be prescribed. Since the amount and percentage have not yet been notified, the rule cannot be implemented until the amount and percentage are notified.

Conclusion- After thorough analysis of Rule- 88D, Rule-59(6e) and Section-75(12) there is a possibility if any difference arises in GSTR-3B and GSTR-2B may lead to unnecessary burden/liability on the registered person. while some other case may be on account of genuine errors and does not have any impact on tax liability. But to prove identification of the error, one requires to submit an explanation by the registered person at the common portal in Part-B of Form DRC-01C.

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Adv Rajbir Singh | IGTM Tax Advisory

Disclaimer: The information contained in this write up is to provide a general knowledge to the intended user. Hence, we recommend that professional advice is sought before taking any action on specific issues before entering into any investment or financial obligation based on this Content.