Dear Taxpayers,

1.The Government vide Notification No. 38/2023 – Central Tax dated 04th Aug, 2023 inserted the Rule 88D in CGST Rule, 2017 dealing with difference in input tax credit available in GSTR-2B and ITC availed in GSTR-3B. This functionality vis a vis this rule has now started operating on the GST portal.

2. The system now compares the ITC available as per GSTR-2B/2BQ with the ITC claimed as per GSTR-3B/3BQ for each return period. If the claimed ITC exceeds the ITC available as per GSTR-2B by predefined limits, as directed by competent authority, the taxpayer shall receive an intimation in the form of Form DRC-01C.

3. Upon receiving the intimation, the taxpayer must file a response using Form DRC-01C Part B. The taxpayer has the option to either provide details of the payment made to settle the difference using Form DRC-03 or provide an explanation for the difference out of the options provided in the form or even choose a combination of both options and file it.

4. In case, no response is filed by the impacted taxpayers in Form DRC-01C Part B, such taxpayers will not be able to file their subsequent period GSTR-1/IFF.

5. To further help taxpayers with the process, a detailed manual containing the navigation details is available on the GST portal. It offers step-by-step instructions and addresses various scenarios related to the functionality. The link is stated below:

 https://tutorial.gst.gov.in/downloads/news/return_compliance_itc_mismatch_intimation_in_form_gst_drc_01c.pdf

Thanking you,
Team GSTN

ITC mismatch compliance triggers DRC-01C intimation; taxpayers must respond or face blockage on subsequent return filing. An automated reconciliation under Rule 88D compares ITC in GSTR-2B with ITC claimed in GSTR-3B; where claimed ITC exceeds available ITC beyond set thresholds, the portal issues a Form DRC-01C intimation. Taxpayers must respond in Part B of Form DRC-01C by making payment through the prescribed mechanism (DRC-03), providing an explanation from the form's options, or both. Non-response prevents filing specified subsequent returns (such as GSTR-1/IFF). A detailed portal manual with navigation and scenario guidance is available.