Receiving an automated intimation in Form GST DRC-01B means the GST portal identified a gap between the outward tax liability declared in your Form GSTR-1 (or Invoice Furnishing Facility) and the tax discharged in Table 3.1 of your Form GSTR-3B. This notice is generated mechanically by the system under statutory rules whenever the discrepancy crosses the percentage and rupee thresholds recommended by the GST Council.
Unlike regular scrutiny notices issued by jurisdictional tax officers under Section 61, Form DRC-01B runs on a rigid seven-day clock. If you fail to file Part B within seven days, the portal locks your outward filing facility automatically, halting your invoicing compliance. Understanding how Rule 88C works, which reason codes to choose in Part B, and how to link your Form GST DRC-03 payment correctly will keep your GST filings open.
Statutory framework under Rule 88C and Rule 59(6)(e)
The Central Government inserted Rule 88C into the CGST Rules through Notification No. 26/2022-Central Tax dated 26 December 2022. The rule governs the mechanism for dealing with differences in tax liability between outward statements and monthly returns:
“Where the tax payable by a registered person, in accordance with the statement of outward supplies furnished by him in FORM GSTR-1, as amended in FORM GSTR-1A if any, or using the Invoice Furnishing Facility in respect of a tax period, exceeds the amount of tax payable by such person in accordance with the return for that period furnished by him 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... and be directed to (a) pay the differential tax liability, along with interest under section 50, through FORM GST DRC-03; or (b) explain the aforesaid difference in tax payable on the common portal, within a period of seven days.” Source: Rule 88C of CGST Rules, CBIC
The statutory requirement is enforced by Rule 59(6)(e) of the CGST Rules. Under this provision, a taxpayer is not permitted to furnish outward details in Form GSTR-1 or use the Invoice Furnishing Facility (IFF) if they have received an intimation in Part A of Form GST DRC-01B and have neither deposited the differential amount nor furnished an explanation in Part B within the prescribed seven-day window.
Notice risk: If you ignore Form DRC-01B, the unpaid and unexplained differential tax is treated as self-assessed liability under Section 75(12) of the CGST Act. The department can initiate direct recovery proceedings under Section 79 without issuing a separate show cause notice under Section 73 or Section 74.
Step-by-step portal workflow to submit Form DRC-01B Part B
Filing Part B requires completing two specific sections on the GST portal. You can find the intimation directly in your portal workspace:
- Locate the intimation: Log in to gst.gov.in, navigate through the Return Compliance menu, and locate the reference number for the tax period. Click on the reference number to open Part A and Part B.
- Download Part A: Click on the DOWNLOAD DRC-01B PART-A button to view the exact tax heads (IGST, CGST, SGST, Cess) and the breakdown of liability compared between GSTR-1 and GSTR-3B.
- Complete Sub-part 1 (Payment details): If you accept that tax was short-paid, make a payment via Form GST DRC-03. Enter the Application Reference Number (ARN) of the DRC-03 challan in Sub-part 1 and click VALIDATE.
- Complete Sub-part 2 (Reason for difference): If the liability difference is due to timing differences, clerical mistakes, or adjustments, select the matching checkbox and enter your factual explanation in the text box.
- Sign and submit: Select the declaration checkbox, pick your authorized signatory from the dropdown list, enter the place of filing, and submit the form using either DSC or EVC.
Official Part B reason codes and defense grounds
According to official user guidance issued on the GSTN Return Compliance Manual, the portal offers pre-configured reason categories in Sub-part 2. Each text box accepts explanations up to 500 characters:
| Portal Reason Category | Underlying Accounting Situation | Required Defense Evidence |
|---|---|---|
| Excess liability paid in earlier tax periods in Form GSTR-3B | Taxpayer paid extra output tax in a previous month and adjusted it by reducing current GSTR-3B cash outflow. | Previous GSTR-3B return ARN, tax ledger entry showing prior overpayment. |
| Transactions of earlier periods declared in current GSTR-1, tax already paid in previous GSTR-3B | Invoices omitted in earlier GSTR-1 were declared in current GSTR-1, but the tax was paid in the original month's GSTR-3B. | Reconciliation sheet mapping original invoice numbers to the past GSTR-3B tax payment. |
| Form GSTR-1 / IFF filed with incorrect details and will be amended in next tax period | Clerical typo in GSTR-1 (such as entering an extra digit or selecting a higher tax slab) while GSTR-3B was paid on correct figures. | Sales register copy, written undertaking to amend outward invoices in Table 9 or Table 10 of upcoming GSTR-1. |
| Mistake in reporting of advances received and adjusted against invoices | Advances were reported in Table 11A of GSTR-1 or adjusted in Table 11B without matching reductions in GSTR-3B. | Advance voucher list, tax invoice mapping, and Table 11 reconciliation register. |
| Any other reasons (to be specified) | Commercial situations such as credit notes omitted in GSTR-3B, zero-rated supply reporting differences, or e-commerce supplies under Section 9(5). | Specific statement of facts within 500 characters, supported by internal working papers. |
Common mistake: If you select a reason checkbox in Sub-part 2, you must enter text in the description box before saving. Leaving the description box empty triggers a validation error on the portal.
Worked mathematical example: calculating differential tax and interest
Consider an enterprise, Bharat Electro Tech, that filed its returns for July 2026 with the following figures:
| Particulars | Taxable Value | IGST | CGST | SGST | Total Tax |
|---|---|---|---|---|---|
| Reported in GSTR-1 (Table 4 B2B + Table 5 B2C Large) | ₹25,00,000 | ₹1,80,000 | ₹1,35,000 | ₹1,35,000 | ₹4,50,000 |
| Reported and paid in GSTR-3B (Table 3.1(a)) | ₹19,00,000 | ₹1,08,000 | ₹1,17,000 | ₹1,17,000 | ₹3,42,000 |
| Difference intimated in Form DRC-01B Part A | ₹6,00,000 | ₹72,000 | ₹18,000 | ₹18,000 | ₹1,08,000 |
Upon reviewing its accounting records, the business discovers two distinct causes behind the ₹1,08,000 tax difference:
- Component 1 (Genuine typo in GSTR-1): One invoice of ₹1,00,000 with 18% IGST (₹18,000) was mistakenly entered twice in GSTR-1. In GSTR-3B, tax was paid only once on the actual transaction. This explains ₹18,000 of IGST difference.
- Component 2 (Actual short payment in GSTR-3B): Two intrastate invoices with taxable value of ₹2,00,000 (CGST ₹18,000 and SGST ₹18,000) and one interstate invoice with taxable value of ₹3,00,000 (IGST ₹54,000) were omitted from GSTR-3B due to a manual consolidation error. This represents genuine unpaid tax of ₹90,000.
Step 1: Discharging differential tax and Section 50 interest via Form DRC-03
For the short-paid tax of ₹90,000 (IGST ₹54,000, CGST ₹18,000, SGST ₹18,000), the company must deposit the tax along with interest under Section 50(1) at 18% per annum. If the payment is delayed by 45 days beyond the GSTR-3B due date, interest is calculated strictly on the unpaid amount:
| Tax Head | Principal Tax | Interest Calculation (18% p.a. for 45 days) | Total Paid via DRC-03 |
|---|---|---|---|
| IGST | ₹54,000 | ₹54,000 × 18% × 45 / 365 = ₹1,198 | ₹55,198 |
| CGST | ₹18,000 | ₹18,000 × 18% × 45 / 365 = ₹399 | ₹18,399 |
| SGST | ₹18,000 | ₹18,000 × 18% × 45 / 365 = ₹399 | ₹18,399 |
| Total | ₹90,000 | ₹1,996 | ₹91,996 |
Per Section 170 of the CGST Act, amounts of tax and interest are rounded off to the nearest rupee. Bharat Electro Tech files Form GST DRC-03, selecting Liability mismatch - GSTR-1 to GSTR-3B as the cause of payment, and receives an ARN.
Step 2: Submitting Part B with combined resolution
In Form DRC-01B Part B, Bharat Electro Tech enters the DRC-03 ARN in Sub-part 1 and validates it. The portal auto-populates the tax paid of ₹90,000 and interest of ₹1,996. For the remaining ₹18,000 IGST discrepancy, the business checks the box for Form GSTR-1 / IFF filed with incorrect details and will be amended in next tax period and enters its concise factual defense.
Sample reply text for Form DRC-01B Part B explanations
The explanation box allows up to 500 characters. Keep your statement factual, concise, and backed by invoice numbers:
For discrepancies involving scrutiny or officer inquiries under Section 61, read our walkthrough on ASMT-10 notice reply format and defense drafting. If your inward credits also show differences between GSTR-2B and GSTR-3B, consult our operational breakdown of DRC-01C ITC mismatch notice replies.
Four mistakes that invalidate your DRC-01B reply
- Selecting an incorrect payment category in Form GST DRC-03: When generating your payment challan, choosing voluntary payment or scrutiny rather than the specific liability difference category prevents the portal from validating your ARN in Sub-part 1.
- Depositing tax without Section 50 interest: Clearing only principal tax leaves the liability open. The system requires interest computed from the statutory due date at 18% per annum under Section 50(1).
- Submitting vague general remarks: Entering unverified statements like "discrepancies will be settled later" without citing specific invoice numbers or prior ARNs leads directly to recovery proceedings under Form GST DRC-01D.
- Delaying action until the seventh day: Portal downtime or OTP delivery delays on day seven can push filing past the statutory cut-off, immediately triggering an outward filing block under Rule 59(6)(e).
Related guides
- GST notice form DRC-01C Part B reply format: reasons for difference
- GST notice Form DRC-01D: recovery under Rule 142B and how to file reply
- GST notice Form DRC-01A: pre-SCN intimation reply guide
- GST notice Form REG-17 cancellation reply format guide
Frequently asked questions
What is the time limit to file a reply in Form DRC-01B Part B?
Under Rule 88C(1) of the CGST Rules, you must submit your reply in Part B of Form GST DRC-01B within seven days of the intimation being issued on the GST common portal.
What happens if you do not reply to Form DRC-01B within seven days?
Under Rule 59(6)(e) of the CGST Rules, the GST portal automatically restricts you from filing Form GSTR-1 or using the Invoice Furnishing Facility for subsequent tax periods until you either pay the differential tax or submit your explanation in Part B.
Can you reply to Form DRC-01B without making a payment?
Yes. If the difference arose due to clerical errors, advance adjustments, or excess tax paid in earlier periods, you can submit Part B by selecting the relevant reason code and providing an explanation up to 500 characters without paying through Form GST DRC-03.
Which cause of payment must be selected in Form GST DRC-03 for DRC-01B?
When depositing differential liability for Form DRC-01B, you must select Liability mismatch - GSTR-1 to GSTR-3B as the cause of payment in Form GST DRC-03. Selecting another head prevents the GST portal from validating your payment ARN in Part B.
Reconcile your GST returns before filing
Catch outward liability mismatches and inward credit gaps before the GST portal triggers Form DRC-01B or DRC-01C. Your GSTR-2B and purchase register files are read in your browser and never uploaded to any server.
Last checked: 17 October 2026. Sources: Rule 88C of CGST Rules, CBIC, GSTN Return Compliance Manual (DRC-01B).