DRC-01C Notice Guide & Compliance Autopilot
Everything you need to know about Rule 88D, why GSTN issued Form DRC-01C for ITC mismatches, and how to reply in Part B within 7 days.
1What is Form GST DRC-01C and Rule 88D?
Under Rule 88D of the Central Goods and Services Tax (CGST) Rules, 2017, the GST Portal automatically conducts algorithmic checks on every filed return. It compares the Input Tax Credit (ITC) availed in Table 4 of Form GSTR-3B against the auto-populated eligible ITC reflected in the recipient's static GSTR-2B statement.
If the ITC claimed in GSTR-3B exceeds the eligible GSTR-2B figure by a margin exceeding 10% and ₹1,00,000 (or other limits recommended by the GST Council), the GSTN portal triggers an automated intimation in Part A of Form GST DRC-01C sent directly to the taxpayer's registered email and portal dashboard.
The Critical 7-Day Legal Deadline
Upon receiving Part A of DRC-01C, you have strictly 7 calendar days to resolve the discrepancy in Part B. If no reply is submitted within 7 days, Rule 59(6) automatically blocks the generation of your outward GSTR-1 / Invoice Furnishing Facility (IFF) for the subsequent month, freezing your invoice upload capability.
2Two Resolution Pathways in Part B of DRC-01C
When responding in Part B on the GST portal, you have two primary options:
Option 1: Reverse ITC & Pay Interest
If the excess ITC was claimed mistakenly (e.g. ineligible blocked credit under Section 17(5) or duplicated invoices), you must reverse the credit and deposit the tax difference along with 18% per annum Section 50 interest via Form GST DRC-03. Enter the DRC-03 ARN in Part B.
Option 2: Provide Valid Justification
If the difference is genuine and supported by law, select the appropriate reason from the pre-defined dropdown options on the portal and furnish a brief justification.
3Pre-Approved Valid Justification Reasons in Part B
The GST portal provides standard reason categories for explaining GSTR-2B vs 3B variances:
4Calculating Section 50 Interest Exposure
Under Section 50(3) read with CGST Rule 88B, interest is applicable at 18% per annum only if the excess ITC was utilized to settle tax dues from the Electronic Credit Ledger. If the credit remained unutilized as a balance in your ledger, no interest is payable.
Interactive DRC-01C Diagnostic Risk Calculator
Simulate your ITC mismatch percentage and estimate Section 50 penalty liability.
DRC-01C Notice Risk & Penalty Calculator
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GSTN system automatically triggers a DRC-01C compliance notice for this discrepancy. Reply required within 7 days or GSTIN suspension will occur.
How to File DRC-01C Part B: Step-by-Step
Extract Notice Details from Portal
Log in to gst.gov.in > Services > Returns > Return Compliance > ITC Mismatch (DRC-01C). Download the Part A PDF and note the Reference Number and tax period.
Run Full Automated Reconciliation
Drop your ERP purchase register into TaxSolver. The algorithm automatically isolates invoices that are missing in GSTR-2B or cross-period vouchers, pinpointing the exact reason for the discrepancy.
Draft Part B & Upload DSC/EVC
Enter payment ARN (if reversed via DRC-03) or select the relevant reason code. Attach the reconciliation summary and file using DSC (Digital Signature Certificate) or EVC OTP.
Frequently Asked Questions on DRC-01C
What is Form GST DRC-01C?
DRC-01C is an automated compliance notice generated by the GST portal under Rule 88D when the Input Tax Credit (ITC) claimed in GSTR-3B exceeds the eligible ITC reflected in auto-drafted GSTR-2B by more than 10% or ₹1,00,000.
What is the deadline to reply to a DRC-01C notice?
You have exactly 7 calendar days from the date of issuance to submit your reply in Part B of Form GST DRC-01C. If you fail to reply within 7 days, your GSTR-1 / IFF for the subsequent period will be automatically blocked.
What are the two main options in Part B of DRC-01C?
In Part B, you must either: (1) Pay the excess ITC claimed along with 18% p.a. interest under Section 50 using Form GST DRC-03, or (2) Provide valid reasons/explanations for the discrepancy from the prescribed dropdown list.
What acceptable reasons can be given for GSTR-3B vs 2B difference?
Valid reasons include: (a) ITC not claimed in earlier tax periods due to inadvertence, (b) Invoices uploaded late by supplier in earlier periods, (c) ITC claimed on import of goods (not in 2B), (d) Typographical errors in GSTR-3B, or (e) Re-claim of previously reversed ITC under Rule 37.
How is Section 50 interest calculated on excess ITC?
Under Section 50(3) of the CGST Act, interest at 18% per annum is charged only on the excess ITC that was both wrongfully claimed AND utilized from the Electronic Credit Ledger against output tax liability, calculated from the due date of filing until the date of payment via DRC-03.
Never Receive a DRC-01C Notice Again
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