The Central Government, through Notification No. 38/2023, has recently introduced the Central Goods and Services Tax Rules (CGST) Rules, 2023, on August 4th, 2023, encompassing a series of innovative regulations. Notably, among the new provisions is the incorporation of Rule 88D, accompanied by the unveiling of Form GST DRC-01C. This strategic addition addresses a significant concern relating to potential discrepancies that may arise between the auto-generated statement containing Input Tax Credit (ITC) details, known as GSTR-2B, and the ITC availed in the return, referred to as GSTR-3B.
- Rule 88D, the latest introduction, delineates a precise protocol for managing any inconsistencies in Input Tax Credit (ITC) between the auto-generated statement in GSTR-2B and the ITC claimed in GSTR-3B.
- Under this rule, taxpayers are provided with a dual-choice scenario: they are required to either remit the surplus credit amount along with the applicable interest as per Section 50, using Form GST DRC-03 or elucidate the rationale behind the observed variance through the common portal within a span of 7 days subsequent to the intimation.
Form GST DRC-01C
- A complementary addition, Form GST DRC-01C, enters the fold as a systematic, automated form designed to facilitate the intimation process for disparities in input tax credit.
- This form is specifically tailored to cater to the new Rule 88D. Structured into two distinct parts, Part A lays out the chronology of mismatches in ITC between GSTR-2B and GSTR-3B, a communication that is relayed electronically through the common portal as well as the taxpayer’s registered email address.
- In contrast, Part B captures the taxpayer’s response to the aforementioned communication, along with the chosen course of action from the two alternatives outlined earlier.
- Should the situation arise where the ITC claimed in GSTR-3B surpasses the amount available in GSTR-2B, the taxpayer will receive an electronic intimation on both the common portal and via email detailing the variance.
- In this scenario, two viable courses of action become apparent: the first is to remit the excess credit amount alongside the associated interest using FORM GST DRC-03, and the second is to provide a comprehensible explanation for the variance on the common portal.
- The prescribed timeframe for taxpayers to respond to either of these two options is strictly set at 7 days from the date of receiving the intimation.
- In the event that a taxpayer fails to furnish a response or if the explanations given are deemed unsatisfactory by the relevant officer, the outstanding amount becomes subject to demand in accordance with the provisions laid out in either Section 73 or Section 74 of the GST Act, 2017.
Results of failing to adhere to Rule 88D
A lack of adherence to Rule 88D can have cascading implications. Failure to explain or address the differences, as stipulated in FORM GST DRC-01C within the designated 7-day window, will result in the taxpayer’s inability to submit sales details via Form GSTR-1 or to utilize the Invoice Furnishing Facility (IFF) for the ensuing tax period. Effectively, non-compliance in this aspect prevents the filing of Form DRC-01C (Part-B), which consequently impedes the submission of GSTR-1/IFF for the subsequent period. Additionally, the taxpayer may become liable to settle the excess ITC amount along with associated interest and potentially face additional penalties as well.