“Explore the evolving landscape of GST compliance with insights into GSTR-1/3B disparities and the introduction of Rule 88C and Form DRC-01B. Navigate through Section 75(12) and the proposed recovery mechanisms. Understand the impact on taxpayers and stay informed with the latest updates. Advisory by Adv Rajbir Singh – IGTM Tax Advisory.”
In recent times, there has been a significant increase in the disparity between the liability declared in form GSTR-1 (M/IFF) and the liability reported in GSTR-3B. Several cases have emerged where Input Tax Credit (ITC) was transferred by the supplier through GSTR-1, even though the taxes had not yet been deposited via GSTR-3B.
Considering these differences, it has been proposed to introduce a new provision in the GST Law, known as Rule 88C, and Form DRC01B, which has been inserted in the CGST Rule, 2017 vide GST notification No. 26/2022-Central Tax, dated-26/12/2022, to implement the decision suggested in the 48th GST Council meeting.
Rule 88C governs the manner of dealing with the difference in liability reported in the statement of outward supplies (GSTR-1) and that reported in the return (GSTR-3B).
Firstly, the author would like to draw your attention to a few provisions of the CGST Act, 2017:
- Section 75(12): This section empowers GST officials to recover unpaid self-assessed tax or interest payable on such tax under Section 79, irrespective of the provisions under Section 73 or Section 74. The expression “self-assessed tax” includes the tax payable in respect of details of outward supplies furnished under Section 37 but not included in the return furnished under Section 39.
- Section 37: This section pertains to the furnishing of details of outward supplies (Form GSTR-1).
- Section 39: This section relates to the furnishing of returns (Form GSTR-3B).
Section 75(12) of the CGST Act, 2017 empowers GST officials to recover tax without issuing a Show Cause Notice under Section 73/74 when self-assessed tax remains unpaid as per the return furnished under Section 37 but not included in the return furnished under Section 39.
There were concerns raised by trade unions, professionals, and field formations regarding how the recovery on account of mismatches between GSTR-1 and GSTR-3B would be dealt with by the tax authorities. To address this, Rule 88C was inserted by the CBIC in December 2022 and became effective from 26-12-2022.
| Financial Year | Tax Period /Month | Particulars | IGST
(Rs.) |
CGST
(Rs.) |
SGST
(Rs.) |
Total GST Liability (Rs.) |
| 2023-24 | June 2023 | Tax Liability as per GSTR-3B | 5,60,000 | 4,10,000 | 4,10,000 | 13,80,000 |
| 2023-24 | Tax Liability as per GSTR-R1 | 6,60,000 | 4,20,000 | 4,20,000 | 15,00,000 | |
| (3B-R1) | -(1,00,000) | -(10,000) | -(10,000) | -(1,20,000) |
The provision under Rule 88C applies when the tax liability as per GSTR-1/IFF exceeds the tax paid in GSTR-3B by a prescribed amount and percentage set by the council. Such mismatches will be considered under the provisions of Rule 88C.
GSTN (Goods and Services Tax Network) will issue an intimation to the taxpayer in Form DRC-01B. The registered person will be notified of the difference in Part A of FORM GST DRC-01B. This form will be uploaded on the common portal, and a copy will also be sent to the registered person’s provided email address as mentioned in the registration certificate or as amended.
The Form DRC-01B will highlight the difference between GSTR-1 and GSTR-3B. The following entities are covered under this provision: regular taxpayers (monthly or QRMP), SEZ developers/units, casual taxpayers, and composition dealers.
The content available in DRC-01B includes two options for the registered person: (a) Pay the differential tax liability along with interest under Section 50 through FORM GST DRC-03, or (b) Explain the difference in tax payable on the common portal.
The registered person must take either of the above actions within a period of seven days upon receiving the intimation on the common portal.
If the taxpayer’s response is deemed unsatisfactory, direct recovery proceedings under Section 79 of the CGST Act, 2017 can be initiated against the taxpayer without any additional chance of being heard.
Section 79 of the CGST Act, 2017 allows for the recovery of the amount payable by the individual. The words “any amount payable” should be interpreted in the context of its utilization, and the liable amount to be paid could only be determined through the adjudication procedure mentioned under Section 73 or 74 of the CGST Act, 2017.
Furthermore, Section 75(5) ensures that an opportunity will be provided if a written request is made or if a negative decision is anticipated for the individual concerned. Any demand or recovery arising due to a mismatch between GSTR-1 and GSTR-3B falls under this category.
It’s important to note that Rule 88C is not yet effective. The rule will be triggered only when the difference between GSTR-1 and GSTR-3B exceeds a certain prescribed amount and percentage. Until the amount and percentage are notified, the rule cannot be implemented.
In conclusion, after a thorough analysis of Rule 88C, Rule 59(6d), and Section 75(12), it is evident that any difference between GSTR-1 and GSTR-3B may lead to an unnecessary burden or liability on the registered person. Some differences may arise due to genuine errors that do not impact the tax liability. To identify the error, the registered person needs to submit an explanation at the common portal in Part B of Form DRC-01B.
Access to the detailed manual on the GST portal enhances the ease of understanding and navigating through the functionality. Taxpayers should utilize this functionality and comply with the requirements to ensure smooth GST compliance procedures.
In a recent update, the Goods and Service Tax Portal has introduced the new functionality of DRC-01B at the common portal to facilitate the changes brought about by Rule 88C. This form, titled “Form DRC-01B – Managing Liability Differences in GST Returns,” allows for the necessary actions to be taken in response to the disparities between GSTR-1 and GSTR-3B.
Advisory: Online Compliance Pertaining to Liability / Difference Appearing in R1 – R3B (DRC-01B)
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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.
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