In line with the recommendations of the GST Council in the 48th GST Council Meeting, the GSTN has developed an online functionality enabling the taxpayers to explain reasons for differences in tax liabilities declared in Form GSTR-1 / Invoice Furnishing Facility (IFF) vis-à-vis the taxes paid while filing Form GSTR-3B. The gist of aforesaid functionality is summarised hereunder:

• The online functionality would compare the tax liability declared in Form GSTR-1/ IFF with the tax paid in Form GSTR-3B for each return period (monthly or quarterly, as the case may be) and intimate the taxpayer in cases where the liability declared in Form GSTR-1 exceeds the amount of tax paid in Form GSTR-3B by a ‘predefined limit’ or by a ‘configurable threshold percentage’¹.
• Pursuant to the above, the taxpayer is to furnish a response to the aforesaid intimation within a period of seven days (as per Rule 88C(1) of the Central Goods and Services Tax Rules, 2017 (CGST Rules)) and provide the following:
  • Details of payments made through Form GST DRC-03.
  • Explanation/ reasons in respect of such difference
  • A detailed FAQ / manual inter alia providing step-by-step instructions and navigation details is available on the GST Portal for taxpayers’ reference². A gist of the key instructions provided in the aforesaid manual is set out hereunder:

• Taxpayers can navigate to the aforesaid intimation on the GST Portal through the Services → Returns → Return Compliance → Liability Mismatch DRC-01B.

•  Part A of Form GST DRC-01B will contain the system-generated intimation of the difference in liability reported in the statement of outward supplies and that reported in returns.

•  Part B of the Form GST DRC-01B will contain the reply by the taxpayer in respect of the intimation of difference in liabilities which is further divided into the following sub-parts:

  • In Part-1, the taxpayer can provide the Application Reference Number (ARN) of the payment made via Form GST DRC-03 for the period for which Form GST DRC-01B is issued.

  • In Part-2, the reason(s) in respect of the unpaid differential tax liability must be provided by specifically providing the following bifurcation:

    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.

    4. Mistake in reporting of advances received and adjusted against invoices.

    5. Any other reasons – to be specified.

[GSTN Advisory dated 29 June 2023]

BDO India Comments

Since non-submission of reply to Form GST DRC-01B within the stipulated time of seven days would lead to differential tax being held to be recoverable from the taxpayer in accordance with Section 79 of the Central Goods and Services Tax Act, 2017, and also the fact that the taxpayers will not be able to file Form GSTR-1/ IFF for the subsequent period, if the reply to Form GST DRC-01B is not filed, it would be important to submit a timely reply. The introduction of this form re-emphasises the importance of proper record keeping and preparation of various reconciliation statements (including internal differences between the returns) as a part of GST return workings.

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¹ While the GST Council had recommended that the phrase ‘predefined limit’ and ‘configurable threshold percentage’ would mean INR 2.5 Mn and 20% respectively, no notification has been issued by CBIC till date for prescribing the aforesaid limits under Rule 88C of the CGST Rules.
² The FAQ / manual can be accessed here.