Shreyansh Singh, an IIT Kanpur alumnus, has eight years of experience in the finance industry. He has spent 5 years at American Express developing mid to long-term strategies for multiple markets including US, Europe and India. Shreyansh currently leads Growth and Strategy initiatives at Pice.
The Goods and Services Tax (GST) regime in India has transformed the indirect taxation system of India and aimed at simplifying indirect taxation and improving compliance. However, due to the nature of returns and reconciliations, it can lead to discrepancies in reported data. To avoid this, the GST framework incorporates measures to identify and address mismatches; one is Form DRC-01B.
In this blog, we will discuss the basics of Form DRC-01B in GST, a demand notice, along with how to reply to an intimation of difference and other important aspects associated with it.
What Is Form DRC-01B?
The Government of India introduced Rule 88C to the CGST or Central Goods and Services Tax Rules, 2017. It allows the sending of automatic intimations to taxpayers for any kind of discrepancies or mismatches between the Form GSTR-3B returns and GSTR-1/IFF. These will be typically sent when the tax liability that has been furnished in Form GSTR-1/IFF is more than the tax liability details in Form GSTR-3B by a set percentage and amount.
The GST-registered taxpayer can pay the difference amount under Section 50 along with interest with Form GST DRC-03. The taxpayer can also provide reasons for the differential amount in the tax payable within 7 days. No matter what action the taxpayer takes, it is mandatory for him to reply to the intimation within Part B of the GST DRC-01B notice.
In case the taxpayer can not reply, this will end up blocking GSTR-1/IFF for the subsequent tax periods. This will be continued till the taxpayer provides a satisfactory explanation for non-payment or deposits the amount that was in the intimation.
How to Reply to the Intimation in Form DRC-01B?
Follow the detailed step-by-step process to reply to the intimation in Form DRC-01B:
● Step 1: Sign in to the common portal of GST with your valid user credentials.
● Step 2: Go to the 'Services' section, then 'Returns' and navigate to 'Return Compliance'. You can either follow this or tap on the 'Return Compliance' link that is present on the dashboard.
● Step 3: Once the screen displays the 'Return Compliance' page, tap on the 'View' option that is present under the Liability Mismatch (DRC-01B)'.
● Step 4: Then, the screen will display the records for pending actions.
● Step 5: Tap on the reference number hyperlink on the page of 'Liability Mismatch (DRC-01B)'. It is important to remember that if the screen displays multiple reference numbers, you may tap on any one option between 'Return Period', 'Reference Number' or 'Status'. You can search for your issued intimation by clicking on any one of these options.
If you tap on 'Return Period', choose the return period and tax period for which you want to file DRC-01B from the dropdown menu.
If you choose 'Reference Number', provide your ARN and tap on 'Search' to retrieve both pending and complete records.
Upon choosing 'Status', select the status ‘Pending’ or ‘Completed’ from the drop-down list and tap on “Search.” You will be able to file DRC-01B for pending records.
There are two parts of ‘Liability Mismatch (DRC-01B)’ – Part and Part B. Part A is the ‘Intimation of Difference in Liability Reported in Statement of Outward Supplies and that Reported in Return’. Part B is the ‘Reply by Taxpayer in Respect of the Intimation of Difference in Liability’. To download Form DRC-01B– Part A, tap on download for the PDF to be generated.
Part B has two subparts. Provide the Application Reference Number (ARN) in the sub-part-1 of the payment that you have made through Form DRC-03 for the tax period in which the issuance of Form DRC-01B was done. Upon entering the value, you can tap on 'Validate'. The screen will now display all the payment details that have been made for the differential amount through Form DRC-03.
● Step 6: If the payment has not been made yet, you can tap on 'Click Here for DRC-03' to do the same.
● Step 7: In sub-part 3, you can choose the reason for the difference in liability reported by tapping on the checkbox, and providing explanations in the available text box. If the reason is not given, you can choose “Any other reason” and explain within 500 characters.
● Step 8: Once you have entered all the relevant details, tap on 'Save'.
● Step 9: Consider previewing the DRC-01B before you file.
● Step 10: Tick the relevant checkbox which is present at the bottom of the page. Enter the place and name of the authorised signatory from the drop-down list.
● Step 11: Tap on 'File GST DRC-01B'.
● Step 12: The screen will display a warning message. Tap on the 'Proceed' option.
● Step 13: You can proceed to file with digital signatures like DSC or EVC by tapping on either the 'File DRC-01B with DSC' option or the 'File DRC-01B with EVC' option.
● Step 14: You can now go to 'Status' and check the status of DRC-1B.
Once the taxable person gets a department intimation in DRC-01B for differential tax liability paid through GSTR-3B more than the configurable threshold limit, it is required for him to file DRC-01B and submit a reply in Part B.
To Whom Does Form DRC-01B Apply?
Form DRC-01B applies to different types of taxpayers. The wide range of taxpayer categories includes casual taxpayers, regular taxpayers, Special Economic Zones (SEZ) developers and units. Additionally, it also includes taxpayers who have both opted in for the Composition Scheme and opted out of it.
Is DRC-01B to be Filed Monthly or Quarterly?
You can file Form DRC-01B both monthly and quarterly. If you file Form DRC-01B quarterly, it will be generated only after the filing of Form GSTR-3B quarterly. On the other hand, if you file Form DRC-01B and are a monthly filer, it will be generated after you file Form GSTR-3B on a monthly basis. Therefore, you can file Form DRC-01B Part B monthly or quarterly, depending on the filing of Form GSTR-3B frequency.
If I Have Not Filed Form DRC-01B for the Previous Tax Period, Can I Still File GSTR1/IFF for the Current Tax Period?
If a taxpayer fails to file a response or reply to the GST DRC-01B form for a previous financial year, they will not be eligible for GSTR-1/IFF filing for the subsequent period. Therefore, it is essential to submit your response timely to avoid any hindrances or interruptions while filing GSTR-1/IFF.
Will I Get Intimated That I Need to Submit a Reply in Form DRC-01B?
Once a taxpayer receives an intimation in Form DRC-01B Part A, they will be assigned an Application Reference Number (ARN). Additionally, they will also receive an intimation via email and SMS for future correspondence and future reference. Apart from this, you can also check if you have received an intimation by going to 'Services' on the official portal of GST, navigating to 'Returns', then 'Return Compliance' and clicking on 'Liability Mismatch DRC-01B'.
How Long Will It Take to Unblock Form GSTR-1/IFF After Filing the Reply in Part B of DRC-01B?
After a taxpayer files the reply under Form DRC-01B – Part B, they can file their GSTR-1/IFF instantly. If you face any issue while filing the GSTR-1/IFF, you may consider logging out of the GST portal, and relogin after a few minutes. This is likely to resolve the issue that you are facing.
Why Am I Getting an Error Message, ‘Please Provide Valid ARN of DRC-03' While Filing a Reply Under Part B of DRC-01B?
If you receive an error message while you enter the Application Reference Number (ARN) for submitting a reply in Part B of GST DRC-01B, you can follow the following steps to resolve the issue:
Ensure the validity and correspondence of the Application Reference Number (ARN) to the same GSTIN and GST DRC-03.
Ensure whether the reason for payment that has been specified in the DRC-03 is the same as “Liability Mismatch – GSTR1 or GSTR-3B liability.”
The entire tax period needs to align with the tax period for which DRC-01B– Part was issued.
You need to file the DRC-3 either on the same date as the Form DRC-01B - Part A issuance or after that date.
For quarterly filers, it needs to include at least a month within the relevant quarter.
For monthly files, it must include the same 'from' and 'to' dates.
Can I Deselect Any Reason for the Difference in Payment in Form DRC-01B After Providing the Details for a Reason Selected Earlier?
If you deselect any reason for a difference in payment in Form DRC-01B after providing the details, then display a message of capture error with a request for already provided details deletion. Therefore, if you delete the details that you entered earlier for a particular reason, you will be able to deselect them.
Conclusion
Form DRC-01B in GST is important in the Goods and Services Tax system. It offers taxpayers an opportunity to correct discrepancies by avoiding hefty penalties. By following a timely DRC-01B reconciliation process and accurate reporting, businesses can minimise the chances of receiving such notices.
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FAQs
What is the purpose of Form DRC-01B?
Form DRC-01B notifies taxpayers of discrepancies between tax liabilities reported in GSTR-1/IFF and GSTR-3B. It serves as an automated alert when the liability reported in GSTR-1/IFF exceeds GSTR-3B by a set percentage and amount, requiring taxpayers to reconcile or explain the differences.
What happens if I fail to respond to Form DRC-01B?
If a taxpayer does not reply to the intimation in Part B of Form DRC-01B within 7 days, GSTR-1/IFF filing for subsequent tax periods will be blocked. This blockage continues until a satisfactory explanation is provided or the differential amount is paid.
How do I respond to Form DRC-01B?
Log in to the GST portal, navigate to 'Return Compliance,' view the intimation under liability mismatch, and reply in Part B of DRC-01B. Taxpayers can pay the difference via DRC-03 or provide explanations for the discrepancies, followed by filing using DSC or EVC.
Can I file GSTR-1/IFF for the current period if I haven't responded to the previous DRC-01B?
No, failure to respond to a previous Form DRC-01B results in GSTR-1/IFF filing blockage for the current period. The response to the notice is mandatory to resume normal filing operations.
Is Form DRC-01B applicable to all taxpayers, and how often can it be filed?
Form DRC-01B applies to regular taxpayers, SEZ units/developers, and casual taxpayers. It can be filed monthly or quarterly, depending on the GSTR-3B filing frequency of the taxpayer. The form ensures compliance across different tax periods.
Shreyansh Singh, an IIT Kanpur alumnus, has eight years of experience in the finance industry. He has spent 5 years at American Express developing mid to long-term strategies for multiple markets including US, Europe and India. Shreyansh currently leads Growth and Strategy initiatives at Pice.
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