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DRC-01B is auto-generated under Rule 88C when GSTR-1 declared liability exceeds GSTR-3B paid tax by more than ₹1 lakh or 20% (whichever is lower). A seven-day reply window on the GST portal determines whether the case closes or escalates to a Section 73 (non-fraud) or 74 (fraud) demand with interest and penalty.
Reply-preparation reconciliation matches every GSTR-1 invoice to the GSTR-3B output tax figure, classifying the gap as credit-note adjustment, amendment lag, data-entry error, or genuine short-payment. Each classification maps to a DRC-01B Part B option — (a) payment made, (b) adjustment explanation, or (c) other reasons — with supporting evidence attached.
Rule 88C threshold monitor (₹1 lakh or 20%), seven-day reply SLA tracker, DRC-03 voluntary payment workflow for short-payment cases, and reply-option router with evidence-file templates.
Pre-filed DRC-01B Part B reply draft, DRC-03 payment challan for genuine short-payments, evidence pack citing GSTR-1 Table 9 amendments or credit notes, and case-closure record for audit.
DRC-01B is an auto-generated notice the GST system issues when the liability you declared in GSTR-1 is materially higher than the tax you actually paid in GSTR-3B. It is triggered after each GSTR-3B filing, and you have seven days to respond on the GST portal before the department moves toward a formal demand under Section 73 or 74.
What Is DRC-01B and Why Did You Receive It
DRC-01B is a system-generated intimation under Rule 88C of the CGST Rules. It is not a final demand — it is a notice asking you to reconcile or explain the gap between your outward supply declaration (GSTR-1) and your tax payment (GSTR-3B).
The trigger threshold is: GSTR-1 declared liability exceeds GSTR-3B declared liability by more than ₹1 lakh or 20% of the GSTR-3B liability amount, whichever is lower.
If you receive DRC-01B, it means the GST system’s automated comparison detected a gap above this threshold after you filed your GSTR-3B. The notice is issued electronically and appears under Services → Returns → DRC-01B on the GST portal.
Common Reasons for GSTR-1 vs GSTR-3B Liability Mismatch
| Reason | GSTR-1 Effect | GSTR-3B Effect | DRC-01B Risk |
|---|---|---|---|
| Credit notes not reflected in GSTR-3B in time | High declared sales | High net liability reported | Yes — overstated GSTR-1 vs 3B |
| ITC adjustment reduces 3B liability but not GSTR-1 | GSTR-1 unchanged | Lower cash payment due to ITC | Triggered if difference exceeds threshold |
| GSTR-1 amendment filed after 3B | Higher declared liability in GSTR-1 | Original 3B unchanged | Yes — amendment creates new gap |
| B2C sales under-reported in GSTR-3B | Correct in GSTR-1 | Under-stated in 3B | Yes — direct liability shortfall |
| RCM liability omitted from GSTR-3B | Not in GSTR-1 (supplier’s return) | Missing from 3B | Separate scrutiny, not DRC-01B |
How to Access and Reply to DRC-01B on the GST Portal
Step 1: Log into the GST portal. Navigate to Services → Returns → DRC-01B.
Step 2: Select the tax period for which you received the notice. The system shows the mismatch amount and the specific GSTIN and period covered.
Step 3: Click on “Reply” to open DRC-01B Part B.
Step 4: Choose one of the three reply options (see next section) and provide the required details. Attach supporting documentation if selecting option (c).
Step 5: Submit. The portal generates an acknowledgement reference number. Save this — it is your proof of timely reply if the matter is ever re-examined.
The reply must be filed within seven days of the DRC-01B issue date. The clock starts from the date shown on the notice, not from when you first log in.
The Three Reply Options and When to Use Each
Option (a) — Paid the difference via DRC-03: Select this if you agree that a liability shortfall exists and have already paid the difference through a DRC-03 voluntary payment. The DRC-03 reference number is entered in the reply. Use this when the mismatch is genuine — you underpaid in GSTR-3B and the correct action is to settle the difference with interest.
Option (b) — Difference is due to ITC adjustment: Select this when you applied eligible ITC in GSTR-3B that reduced your cash payment, but the full liability still appears in GSTR-1. The net effect is that the declared outward supply in GSTR-1 is higher than the cash paid in GSTR-3B, but no tax has actually gone unpaid because ITC offset the balance. Attach the ITC workings showing the GSTR-2B source and the GSTR-3B Table 4 entries.
Option (c) — Other reasons: Select this for any other explanation including credit notes, return amendments, inter-GSTIN corrections, or cases where the GSTR-1 figure is itself wrong due to an inadvertent entry. Provide a clear, written explanation. This option keeps the matter open for the officer’s review and does not close the notice automatically — the officer may accept the explanation or escalate.
DRC-01B and DRC-03: When to Make a Voluntary Payment
DRC-03 is the mechanism for making voluntary GST payments outside the regular GSTR-3B cycle. When you receive DRC-01B and the liability gap is genuine, paying via DRC-03 before filing the reply is the cleanest resolution path.
The payment through DRC-03 should cover the principal tax difference plus interest at 18% per annum from the original due date (20th of the relevant month) to the date of payment. The interest amount is calculated on the unpaid tax for the number of days it remained unpaid.
Not all DRC-01B notices require DRC-03 payments. If the mismatch is attributable to ITC offset, credit notes, or a data difference in GSTR-1 that will be corrected in the next filing, Option (b) or Option (c) is the appropriate reply without a payment.
What Happens If You Don’t Reply Within 7 Days
If no reply is filed within seven days, the GST department may initiate proceedings under:
- Section 73 (non-fraud cases): Demand with interest and a 10% penalty. A show-cause notice is issued before the demand order.
- Section 74 (fraud or suppression): Demand with interest and a 100% penalty. Higher scrutiny and longer proceedings.
The absence of a reply does not automatically mean the higher penalty applies. However, it removes your opportunity to explain the mismatch proactively and transfers the characterisation of the discrepancy to the department’s assessment.
How to Prevent DRC-01B Notices Through Reconciliation
DRC-01B originates from a reconciliation gap between two returns you control. Organisations that reconcile GSTR-1 to GSTR-3B before filing each month — checking that the tax liability declared in outward supplies matches the tax being paid — eliminate most DRC-01B triggers at source.
The critical checkpoint is the month-end GSTR-1 vs GSTR-3B comparison: does total output tax in GSTR-1 equal output tax in GSTR-3B Table 3.1, adjusted for the ITC claimed in Table 4? If the difference exceeds ₹1 lakh or 20% of GSTR-3B liability, the filing will trigger a DRC-01B notice. Catching this before filing allows the organisation to either amend GSTR-1, increase the GSTR-3B payment, or document the ITC offset before the notice is generated.
Purpose-built GST reconciliation software that runs this GSTR-1 vs GSTR-3B pre-filing check as part of the monthly close workflow converts DRC-01B from a reactive notice-management exercise into a preventable event. For organisations managing multiple GSTINs or high-volume B2B invoicing, reconciliation software for India that handles this check alongside IMS review and GSTR-2B matching provides the most direct path to avoiding automated demand notices.