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A finance manager logs into the GST portal on a Tuesday morning and finds two intimations against the same GSTIN for the same tax period — a DRC-01B under Rule 88C flagging an outward-supply mismatch, and a DRC-01C under Rule 88D flagging an input tax credit mismatch. Both carry a seven-day reply clock. The screens look nearly identical, the reply architecture is the same three-option flow, and the temptation is to treat them as one notice and file one working paper. The confusion is not what to do — the confusion is why there are two separate notices for what looks like the same reconciliation exercise, and whether the reply can be combined. The absence of a clear plain-language distinction at the moment the intimations land is what pushes a bona fide reporting artefact on the input side into a Section 74 fraud allegation that could have closed with a single working paper filed as a Part B rebuttal against the DRC-01C intimation number.
The two intimations flag two different reconciliation gaps that share the same portal machinery but operate on different sides of the ledger. DRC-01B under Rule 88C is the outward-supply mismatch — the tax you declared in GSTR-1 Table 3.1 exceeds the tax you paid in GSTR-3B Table 3.1 for the same tax period. It became effective 26 December 2022 via Notification 26/2022-Central Tax. DRC-01C under Rule 88D is the input-tax-credit mismatch — the ITC you availed in GSTR-3B Table 4 exceeds the eligible ITC available in the auto-generated GSTR-2B for the same tax period, breaching the Rule 36(4) ceiling. It became effective 4 August 2023 via Notification 38/2023-Central Tax. The seven-day reply clock, the three-option reply architecture (Option A DRC-03 payment, Option B Part B rebuttal, Option C acceptance with Section 50 interest at 18 per cent per annum and Section 122 penalty), and the escalation path to Section 73 non-fraud or Section 74 fraud show-cause notices are identical. The working papers behind each reply are entirely different — DRC-01B triangulates GSTR-1 amendment history and Section 39(9) rectifications; DRC-01C triangulates the GSTR-2B against the ITC claimed, the IMS action log, the Rule 37A supplier-default cascading reversal queue, and the Section 17(5) blocked-ITC classification register.
A named reply owner (the GST executive) and a named reviewer (the controller). Two separate working paper templates — one for DRC-01B (tax period, GSTR-1 figure, GSTR-3B figure, difference, root cause, option selected) and one for DRC-01C (tax period, GSTR-3B ITC availed, GSTR-2B eligible ITC, difference, root cause bucket among supplier-late-filing, Rule 37A cascade, IMS action, or Section 17(5) misclassification, option selected). A seventy-two-hour triage window inside the seven-day clock — Hour 1 for triage, Hours 2 to 24 for root cause identification against the respective supporting register, Hours 24 to 48 for reply drafting, Hours 48 to 72 for controller sign-off. A cross-reference to the reconciliation control register so the failure mode that produced each intimation is captured, ranked, and closed with a specific detection control in the monthly close cadence.
Every DRC-01B replied to inside the seven-day window with an appropriate DRC-03 payment, a Section 39(9) Part B rebuttal, or an Option C acceptance with interest and penalty. Every DRC-01C replied to separately with its own working paper. Both replies carry the correct statute citation, the working papers are filed in the monthly close folder, and the reconciliation control register captures both failure modes with named detection controls that would have caught the mismatch inside the monthly close cadence — the outward-side control on Day 18 during GSTR-3B assembly, the ITC-side control on Day 16 during the GSTR-2B to purchase register match. No DRC-01B or DRC-01C carried past the seven-day clock without a written escalation to the controller and a documented reason.
The GST portal is showing two intimations against your GSTIN for the same tax period. One is a DRC-01B — a Rs 1.15 lakh outward-supply mismatch under Rule 88C. The other is a DRC-01C — a Rs 3.2 lakh ITC-excess mismatch under Rule 88D. Both carry a seven-day reply clock. The reply screens look nearly identical. The three-option response flow is the same. The temptation is to treat them as one notice and file one working paper.
The problem: they are not the same notice. They flag two different reconciliation gaps on two different sides of the GST ledger, and the working paper behind each reply has to come from a different source register.
The quick answer
DRC-01B is the outward-supply mismatch intimation — the tax you declared in GSTR-1 Table 3.1 exceeds the tax you paid in GSTR-3B Table 3.1 for the same tax period. It is issued under Rule 88C of the CGST Rules 2017, inserted by Notification 26/2022-Central Tax dated 26 December 2022.
DRC-01C is the input-tax-credit mismatch intimation — the ITC you availed in GSTR-3B Table 4 exceeds the eligible ITC available in the auto-generated GSTR-2B for the same tax period, breaching the Rule 36(4) ceiling. It is issued under Rule 88D, inserted by Notification 38/2023-Central Tax dated 4 August 2023.
The seven-day clock, the three-option reply architecture, and the escalation path to Section 73 or Section 74 show-cause notices are identical. The working papers behind each reply are entirely different — because one measures the outward liability side and the other measures the input credit side.
What DRC-01B actually flags — the outward mismatch
The system arithmetic behind DRC-01B is a single subtraction per GSTIN per tax period: the tax component you reported in GSTR-1 Table 3.1 for the period, minus the tax you paid in GSTR-3B Table 3.1 for the same period. If the difference exceeds the GST Council’s recommended threshold, the DRC-01B fires.
The illustrative Rs 1.15 lakh shortfall in the example above comes from a GSTR-1 declared liability of Rs 12.6 lakh against a GSTR-3B tax paid of Rs 11.45 lakh. The common underlying causes are an invoice cross-period slip (invoice landed in GSTR-1 of month M but the tax was paid in GSTR-3B of month M+1), a credit note timing drift under Section 34, a subsequent-period GSTR-1 amendment that back-dated the liability, a duplicate invoice reported twice in GSTR-1 where the actual liability is only what was paid in GSTR-3B, or an export-with-payment versus export-without-payment misclassification that leaves the IGST figures unreconciled.
The GSTR-1 vs GSTR-3B failure modes brief catalogues twelve failure modes across the process design taxonomy and shows which reconciliation control catches each one before the DRC-01B fires.
What DRC-01C actually flags — the ITC excess
The system arithmetic behind DRC-01C is a different subtraction: the ITC you availed in GSTR-3B Table 4 (the input tax credit line, split between IGST, CGST, SGST, and Cess) for the tax period, minus the eligible ITC available in the auto-generated GSTR-2B for the same tax period. If the availed exceeds the available by more than the Council threshold, the DRC-01C fires.
The illustrative Rs 3.2 lakh ITC-excess comes from a GSTR-3B Table 4(A) figure of Rs 15.6 lakh in ITC claimed against a GSTR-2B eligible ITC of Rs 12.4 lakh. The Rule 36(4) ceiling was breached — the invoice count and value on the recipient’s side outran what the suppliers had reported to the portal for the period.
The most common underlying causes are quite different from the DRC-01B causes:
- A supplier filed late. The invoice sits in the recipient’s purchase register for month M, the tax was claimed in the recipient’s GSTR-3B for month M, but the supplier only filed GSTR-1 for month M+1 or later. The invoice will appear in a subsequent GSTR-2B; the current-period ITC claim was premature.
- A Rule 37A cascading reversal has not yet been applied. A supplier who filed GSTR-1 but did not file GSTR-3B for the invoice period by 30 September of the following FY triggers a mandatory reversal by the recipient — the Rule 37A supplier-default framework is the technical treatment for this cascade.
- An IMS Reject or Pending action was taken after the GSTR-3B was already filed. The invoice was in the earlier GSTR-2B when the ITC was claimed; a colleague or auto-action removed it from a subsequent GSTR-2B, and the reconciliation working paper was not updated.
- A Section 17(5) blocked-ITC line was inadvertently claimed on the eligible side. The invoice is in GSTR-2B, but the underlying supply (food and beverages, motor vehicles up to thirteen seats, club membership, gifts) is blocked credit — the eligible-ITC figure the portal reports correctly excludes it, and the recipient’s claim of the credit was outside the compliance boundary.
Side-by-side — what is identical, what is different
Identical across DRC-01B and DRC-01C. The seven-day calendar reply clock. The Part A auto-generated intimation format on the portal. The three-option reply architecture — Option A voluntary payment via Form DRC-03, Option B Part B rebuttal on the portal, Option C acceptance with Section 50 interest at 18 per cent per annum on the tax component and Section 122 penalty at Rs 10,000 or an amount equivalent to the tax evaded, whichever is higher. The escalation to a Section 73 show-cause (10 per cent penalty ceiling for non-fraud cases, three-year concluding window) if the reply is not filed, or to a Section 74 show-cause (100 per cent penalty ceiling, five-year concluding window) where the department reads the pattern as fraud, wilful misstatement, or suppression.
Different across the two notices. The statute basis — Rule 88C for DRC-01B (effective 26 December 2022), Rule 88D for DRC-01C (effective 4 August 2023). The side of the ledger measured — outward liability for DRC-01B, input tax credit for DRC-01C. The source register the working paper draws from — GSTR-1 amendment history and Section 39(9) rectification queue for DRC-01B, the GSTR-2B versus purchase register match, the IMS action log, the Rule 37A cascading reversal queue, and the Section 17(5) blocked-ITC classification register for DRC-01C. The named owner inside a finance team — the outward-side reply usually goes to the tax executive who runs the GSTR-3B assembly; the input-side reply usually goes to the AP controller who runs the ITC eligibility register.
The three reply options — same architecture, different anchors
For both notices, Option A is a voluntary Form DRC-03 payment settling the shortfall. For DRC-01B, this settles the outward-side underpayment with only Section 50 interest attached. For DRC-01C, this is a voluntary ITC reversal that clears the excess without a Section 122 penalty firing.
For both notices, Option B is a Part B rebuttal on the portal with a working paper attached. The DRC-01B rebuttal cites Section 39(9) of the CGST Act as the amendment mechanic and attaches the GSTR-1 amendment reference or the Section 34 credit note reference that closed the gap in a subsequent period. The DRC-01C rebuttal attaches the supplier-side working paper showing the invoice will legitimately appear in a subsequent GSTR-2B, the Rule 37A reversal will process on the 30 September following-FY deadline, or the IMS action was taken after GSTR-3B in a way that does not require current-period reversal.
For both notices, Option C is acceptance with the full interest and penalty attached. This is the “least bad” option when the shortfall cannot be justified and the taxpayer wants to pre-empt a Section 74 fraud allegation by voluntarily surfacing the exposure inside the seven-day window.
The technical treatment of the reply mechanics is split across two separate guides — the DRC-01B reply guide and the DRC-01C ITC-mismatch reply guide — because the working paper is fundamentally different.
The one to escalate first — the Section 74 fraud gate on the input side
Non-response to either intimation opens the door to a Section 73 or Section 74 show-cause. But the escalation pressure is not symmetric. A DRC-01B on an outward-supply mismatch reads as a bona fide reporting artefact in most cases — the invoice was reported in the wrong month, the amendment closed the gap late, the credit note timing drifted. The department typically stays at Section 73 with the 10 per cent penalty ceiling.
A DRC-01C on an ITC excess sits closer to the Section 74 fraud gate. The reason: the taxpayer received a benefit (ITC utilisation against outward liability, effectively cash-flow parity with a paid-tax position) that they were not entitled to at the time. The department reads this as an intended over-claim more frequently than the outward-side gap, and the pattern of repeated DRC-01C non-response is what pushes the same shortfall from Section 73 into Section 74 territory — with the penalty ceiling rising from 10 per cent of the tax due to 100 per cent, and the assessment window extending from three years to five.
The DRC-01B 72-hour triage playbook is the operational treatment for the first three days of the seven-day window and applies to DRC-01C with the working paper substitution described above.
When your manual GSTR-3B versus GSTR-2B checking outgrows itself
One DRC-01B or one DRC-01C per year is normal residual for a mid-market enterprise. Two or more of either type, sustained across consecutive financial years, signals a structural cause — an outward-side reconciliation control that does not run on Day 18 of the monthly close during GSTR-3B assembly, an input-side reconciliation control that does not run on Day 16 during the GSTR-2B versus purchase register match, or an IMS action queue that is not closed before GSTR-3B is submitted.
Above three intimations of either type in a year, the manual GSTR-1 versus GSTR-3B and GSTR-3B versus GSTR-2B cross-checks have outgrown the tax executive’s spreadsheet. The three-way ITC workbook gives the finance team the manual template that holds up to roughly 200 suppliers; above that scale, GST reconciliation software treats both the outward-side Rule 88C tolerance and the input-side Rule 88D tolerance as first-class continuously-refreshed outputs, so the Table 3.1 outward mismatch and the Table 4 ITC excess are flagged inside the monthly close window rather than surfaced two months later as a portal intimation with a seven-day clock attached.
Go deeper
- DRC-01B reply guide — the three-option reply mechanics
- DRC-01C ITC-mismatch reply guide — the ITC-excess reply mechanics
- DRC-01B 72-hour triage playbook — the hour-by-hour operational treatment
- GSTR-1 vs GSTR-3B failure modes — the design-layer catalogue
- Rule 37 and Rule 37A ITC reversal on supplier default
- Three-way ITC workbook — free download
- GST reconciliation software India
Frequently Asked Questions
Are DRC-01B and DRC-01C the same notice with different codes?
No — they are two separate intimations flagging two different reconciliation gaps, and a taxpayer can receive both against the same GSTIN in the same month. DRC-01B is issued under Rule 88C of the CGST Rules 2017 (inserted 26 December 2022 by Notification 26/2022-CT) and flags the outward-supply mismatch where the tax liability declared in GSTR-1 exceeds the tax paid in GSTR-3B. DRC-01C is issued under Rule 88D (inserted 4 August 2023 by Notification 38/2023-CT) and flags the input-side mismatch where the ITC availed in GSTR-3B Table 4 exceeds the eligible ITC available in the auto-generated GSTR-2B for the same tax period. The seven-day reply clock is identical, the portal reply screen looks nearly identical, and the three-option reply architecture is the same — but the working paper that supports the reply is entirely different because the underlying arithmetic is different.
The same tax period got a DRC-01B and a DRC-01C on the same day. Do I reply together?
No — file two separate replies, each with its own working paper. The DRC-01B reply cites Section 39(9) of the CGST Act if you are justifying the outward-side gap (the GSTR-1 was overstated or a subsequent-period amendment closed the difference), attaches the GSTR-1 amendment reference or the credit note reference under Section 34, and closes on the portal against the DRC-01B intimation number. The DRC-01C reply cites the underlying reason for the ITC excess (a supplier who filed GSTR-1 and GSTR-3B late so the invoice moved into a later GSTR-2B, a Rule 37A supplier default reversal that has not yet cascaded, an IMS Reject action taken after the GSTR-3B was filed, or an eligible-ineligible classification error against Section 17(5)) and closes on the portal against the DRC-01C intimation number. Mixing the two replies into one working paper is what causes the department to bounce the reply back for clarification and re-start the seven-day clock in the taxpayer’s disfavour.
The DRC-01C ITC-excess figure is Rs 3.2 lakh. Where does the number come from?
The portal runs the arithmetic as GSTR-3B Table 4 total ITC availed for the tax period, minus GSTR-2B eligible ITC for the same tax period, minus any adjustments the portal recognises. If GSTR-3B Table 4(A) showed Rs 15.6 lakh in ITC availed but GSTR-2B for the same month showed Rs 12.4 lakh in eligible ITC, the difference is Rs 3.2 lakh — that is what DRC-01C flags. The most common underlying causes are (a) the invoice from a supplier who has now filed GSTR-1 in a later period is in the current month’s ITC claim but not yet in the current month’s GSTR-2B, (b) a Rule 37A cascading reversal for a supplier who did not file GSTR-3B for the invoice period by 30 September of the following FY has not yet been applied by the recipient, (c) an IMS Reject action removed the invoice from GSTR-2B after GSTR-3B was already filed, or (d) a Section 17(5) blocked ITC line was inadvertently claimed on the eligible side.
What is the penalty difference between DRC-01B and DRC-01C if I ignore them both?
The penalty machinery is identical — non-response opens a Section 73 show-cause with a ten per cent penalty ceiling for a non-fraud case, or a Section 74 show-cause with a one hundred per cent penalty ceiling where the department reads the pattern as suppression. What differs is the pressure to escalate to Section 74. A DRC-01B non-response on a Rs 1.15 lakh outward-side mismatch is a bona fide reporting artefact in most reads — the department typically stays at Section 73. A DRC-01C non-response on a Rs 3.2 lakh ITC-excess sits closer to the Section 74 fraud gate because the taxpayer received a benefit (ITC utilisation against outward liability) that they were not entitled to at the time — the department reads this as an intended over-claim more often than the outward-side gap, and the seventy-two-hour internal triage against the underlying supplier-side or IMS-side cause matters proportionately more.
Do the two notices have the same three response options — DRC-03, justify, or accept with interest and penalty?
Yes — the reply architecture is identical across DRC-01B and DRC-01C, and this is the one design choice the portal made deliberately to keep the reply mechanics repeatable. Option A on both notices is a voluntary payment via Form DRC-03 — for DRC-01B this settles the outward-side shortfall with only Section 50 interest at 18 per cent per annum; for DRC-01C this reverses the ITC-excess with the same Section 50 interest and no Section 122 penalty because the reversal is voluntary before assessment. Option B on both is a Part B rebuttal on the portal — for DRC-01B citing Section 39(9) of the CGST Act for the amendment window that already closed the gap; for DRC-01C attaching the working paper showing the ITC will legitimately land in a subsequent GSTR-2B or the Rule 37A cascading reversal will process on 30 September of the following FY. Option C on both is acceptance with interest and penalty. The response mechanics rhyme; the working papers are different.
Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →
- ▸ Rule 88C, Central Goods and Services Tax Rules 2017 — Manner of dealing with difference in liability reported in statement of outward supplies and that reported in return. Where the tax payable by a registered person in accordance with the statement of outward supplies furnished by him under Section 37 in FORM GSTR-1 for a tax period exceeds the tax paid by such person in the return furnished for the same period in FORM GSTR-3B by such amount and such percentage as may be recommended by the Council, the said registered person shall be intimated of such difference in Part A of FORM GST DRC-01B, electronically on the common portal, and shall reply within a period of seven days. This is the anchor for DRC-01B — the outward-supply mismatch intimation.
- ▸ Rule 88D, Central Goods and Services Tax Rules 2017 — Manner of dealing with difference in input tax credit available in auto-generated statement containing the details of input tax credit and that availed in return. Where the amount of input tax credit availed by a registered person in the return for a tax period furnished by him in FORM GSTR-3B exceeds the input tax credit available to such person in accordance with the auto-generated statement containing the details of input tax credit in FORM GSTR-2B in respect of the said tax period by such amount and such percentage as may be recommended by the Council, the said registered person shall be intimated of such difference in Part A of FORM GST DRC-01C, electronically on the common portal, and shall reply within a period of seven days. This is the anchor for DRC-01C — the ITC-excess mismatch intimation.
- ▸ Notification 26/2022-Central Tax dated 26 December 2022 — Central Government inserted Rule 88C into the CGST Rules 2017 to provide for a system-generated intimation in Part A of FORM GST DRC-01B where the tax liability declared in GSTR-1 exceeds the liability discharged in GSTR-3B by a difference exceeding the Council-recommended threshold. Effective from 26 December 2022 — every DRC-01B a taxpayer sees today runs under this rule.
- ▸ Notification 38/2023-Central Tax dated 4 August 2023 — Central Government inserted Rule 88D into the CGST Rules 2017 to provide for a system-generated intimation in Part A of FORM GST DRC-01C where the input tax credit availed in GSTR-3B exceeds the input tax credit available in GSTR-2B for the same tax period by more than the Council-recommended threshold. Effective from 4 August 2023 — this is the dated anchor for every DRC-01C intimation issued since.
- ▸ Rule 36(4), Central Goods and Services Tax Rules 2017 — Input tax credit availed by a registered person in respect of invoices or debit notes the details of which have not been furnished by the suppliers under Section 37 shall not exceed the amount of input tax credit available in respect of invoices or debit notes the details of which have been furnished by the suppliers under Section 37 in FORM GSTR-1 or IFF. The GSTR-2B figure is the hard ceiling. Every rupee of ITC claimed in GSTR-3B Table 4 above the GSTR-2B eligible-ITC total is what fires the Rule 88D DRC-01C intimation.
- ▸ Section 73 and Section 74, Central Goods and Services Tax Act 2017 — Section 73 governs determination of tax not paid or short paid or ITC wrongly availed for any reason other than fraud or wilful misstatement — the penalty ceiling is ten per cent of the tax due or ten thousand rupees, whichever is higher, and the case is concluded within three years from the due date of the annual return. Section 74 governs the same by reason of fraud, wilful misstatement, or suppression of facts — penalty rises to one hundred per cent of the tax due and the concluding window extends to five years. Non-response to either DRC-01B or DRC-01C typically opens a Section 73 show-cause, and a pattern of non-response is what escalates the same shortfall into Section 74.