Notices & ITC Compliance

GST notice DRC-01C reply format: Rule 88D ITC mismatch reasons and timelines

By gstr2bmatch.in Editorial Team · Updated 18 October 2026 · 9 min read

To respond to an automated Form GST DRC-01C notice, sign in to the GST portal, go to Services, open Returns, choose Return Compliance, and select ITC Mismatch DRC-01C. You have exactly seven days to either pay the excess input tax credit via Form GST DRC-03 with Section 50 interest, explain the difference using Part B dropdown reasons, or provide a split response covering both. Failing to reply within seven days locks your outward Form GSTR-1 filing under Rule 59(6)(e).

Receiving an intimation in Form GST DRC-01C means that the input tax credit claimed in Table 4(A) of your Form GSTR-3B exceeded the eligible input tax credit generated in your Form GSTR-2B by more than the notified Council tolerance. Unlike personal audit inquiries initiated by local ward officers, Form GST DRC-01C is an automated system intimation generated by GSTN servers under statutory mandates. For outward liability discrepancies between GSTR-1 and GSTR-3B, see our guide on GST notice Form DRC-01B mismatch reply, or review our analysis of ASMT-10 scrutiny notice reply format.

Statutory framework under Rule 88D and Rule 59(6)(e)

The Central Board of Indirect Taxes and Customs inserted Rule 88D into the Central Goods and Services Tax Rules via Notification No. 38/2023-Central Tax. The statutory rule dictates that where input tax credit availed in Form GSTR-3B exceeds the credit available in Form GSTR-2B by a specified percentage and amount, the taxpayer receives Part A of Form GST DRC-01C on the portal and registered email. The official text of the statutory notification is published on the government repository at CBIC Tax Information Portal.

Upon generation of Part A, the taxpayer has a strict window of seven days to complete one of two actions:

  1. Pay an amount equal to the excess input tax credit along with applicable interest under Section 50 through Form GST DRC-03.
  2. Submit a formal explanation on the common portal in Part B of Form GST DRC-01C detailing the reasons for the discrepancy.

If the taxpayer fails to respond or pay within seven days, Rule 59(6)(e) is activated automatically by the portal engine. This sub-rule blocks the taxpayer from furnishing outward supplies in Form GSTR-1 or through the Invoice Furnishing Facility for subsequent tax periods until Part B is submitted. Detailed user instructions can be verified directly on the GSTN DRC-01C Portal Advisory and procedural return rules at the GST Common Portal.

Notice consequence: Ignoring Form GST DRC-01C does not merely halt future GSTR-1 filing. Under Rule 88D(3), any amount remaining unpaid or unexplained is referred directly to the proper officer for recovery under Section 79 of the CGST Act without needing an extended show cause notice.

Standard dropdown reasons in Form GST DRC-01C Part B

When you access Part B on the GST portal, the system requires you to assign reasons for the excess credit claimed. The portal provides standard predefined categories:

  1. Input tax credit not availed in earlier tax periods: Used when eligible invoices from preceding months within the same financial year were missed earlier and claimed in the current Form GSTR-3B under Section 16(4) limits.
  2. ITC availed in respect of inward supplies where supplier filed GSTR-1 late: Relevant when a vendor uploaded invoices after the 11th or 13th cut-off date, causing the invoice to miss that month's GSTR-2B generation cut-off while the goods and tax invoice were physically received.
  3. ITC reversed in previous tax period reclaimed in current period: Applies to temporary reversals reclaimed under Rule 37 (supplier paid after initial 180 days) or Rule 37A (supplier subsequently filed GSTR-3B after initial default).
  4. Inward supplies received in previous period but accounted for in current period: Relates to material in transit or delayed accounting where goods reached the factory in the current month against a prior month invoice.
  5. Any other reason: Free text explanation box (up to 500 characters) where you describe specific factual situations such as clerical typographical errors, accompanied by a supporting PDF attachment up to 500 KB.

Common mistake: Selecting Any other reason without providing clear numerical invoice references or uploading a clean reconciliation sheet frequently leads to rejection by the jurisdictional assessing officer.

Step-by-step portal reply workflow

Follow these exact menu steps on the GST portal to access and submit Part B:

  1. Log in to your GST portal account using valid credentials.
  2. Navigate to Services → Returns → Return Compliance.
  3. Click on the ITC Mismatch (DRC-01C) tile.
  4. Locate the reference number for the disputed tax period and click on Part B.
  5. If you deposited tax voluntarily, enter the ARN of Form GST DRC-03 under Section 1 and click Validate.
  6. If you are explaining the variance, select the appropriate option from the dropdown menu in Section 2, enter your remarks, and upload your reconciliation statement.
  7. Tick the declaration checkbox, select the authorized signatory, and file using DSC or EVC.
Access Return Compliance → Open DRC-01C Tile → Enter DRC-03 ARN or Pick Dropdown Reason → File with EVC/DSC

Worked example: resolving an ITC mismatch notice

Consider Om Logistics Private Limited, an Indian transport and warehousing enterprise based in Pune. For August 2026, the company claimed ITC in Form GSTR-3B that exceeded Form GSTR-2B, triggering a DRC-01C intimation.

ComponentIGSTCGSTSGSTTotal ITC
ITC claimed in GSTR-3B Table 4(A)(5)₹6,50,000₹2,25,000₹2,25,000₹11,00,000
ITC auto-populated in GSTR-2B₹5,00,000₹1,75,000₹1,75,000₹8,50,000
Excess ITC flagged in DRC-01C Part A₹1,50,000₹50,000₹50,000₹2,50,000
Rule 37 recredit (vendor paid after 180 days)₹1,00,000₹30,000₹30,000₹1,60,000
Clerical excess claimed by data entry error₹50,000₹20,000₹20,000₹90,000

The total variance of ₹2,50,000 is resolved through two distinct compliance steps:

  1. For the clerical error of ₹90,000, the company paid ₹90,000 tax plus Section 50 interest of ₹1,350 via Form GST DRC-03 under payment head ITC mismatch - GSTR-2A/2B to GSTR-3B.
  2. For the remaining ₹1,60,000, the company selected the dropdown reason: ITC reversed in previous tax period reclaimed in current tax period, and attached proof of vendor payment and past GSTR-3B Table 4(B)(2) reversal records.

Sample reply draft for Form GST DRC-01C Part B

You can adapt this text when filing your submission or responding to officer follow-up queries:

To, The Proper Officer, Ward / Range Circle, State / Central GST Department. Sub: Response to System Generated Intimation in Form GST DRC-01C for Tax Period August 2026 Ref: Reference ID DRC01C/27AAAAA0000A1Z5/082026/00142 Dated 24 September 2026 Respected Sir / Madam, With reference to the intimation issued in Form GST DRC-01C under Rule 88D regarding the difference between Input Tax Credit claimed in Form GSTR-3B (INR 11,00,000) and available in Form GSTR-2B (INR 8,50,000) for August 2026, we submit our factual explanation: 1. Partial Payment via Form GST DRC-03: Out of the total difference of INR 2,50,000, a sum of INR 90,000 (IGST INR 50,000, CGST INR 20,000, SGST INR 20,000) was erroneously claimed due to an inadvertent clerical punch error. The said differential credit along with applicable interest under Section 50 amounting to INR 1,350 has been deposited via Form GST DRC-03 bearing ARN AD2709260018451 dated 28 September 2026. 2. Lawful Recredit under Rule 37: The balance difference of INR 1,60,000 (IGST INR 1,00,000, CGST INR 30,000, SGST INR 30,000) represents eligible recredit taken under the second proviso to Section 16(2) read with Rule 37(2). This credit was originally reversed in Form GSTR-3B for February 2026 upon exceeding 180 days of non-payment. Full payment of invoice value and tax was cleared to the supplier via banking channels in August 2026, entitling us to reclaim this credit. Bank payment receipts and previous reversal ledgers are attached. In view of the above explanation and voluntary tax payment, we request your good office to accept our submission in Part B and drop further proceedings. Yours faithfully, For Om Logistics Private Limited Authorized Signatory

Frequently asked questions

What is the time limit to file a reply in Form GST DRC-01C Part B?

Under Rule 88D(1) of the CGST Rules, you must submit your response in Part B of Form GST DRC-01C within seven days of the intimation being generated on the GST portal.

What happens if a taxpayer fails to respond to Form DRC-01C within seven days?

If you do not reply or pay within seven days, the GST common portal automatically restricts filing of Form GSTR-1 or the Invoice Furnishing Facility for subsequent tax periods under Rule 59(6)(e). In addition, tax authorities can initiate recovery proceedings under Section 79.

Can you reply to Form DRC-01C without making any payment via DRC-03?

Yes. If the discrepancy arose due to legitimate reasons such as recredit of reversed ITC under Rule 37 or Rule 37A, invoices accounted for in a different month, or clerical mistakes, you can submit Part B by selecting the relevant dropdown reason and providing supporting facts without any cash payment.

Which payment reason must be selected in Form GST DRC-03 when paying DRC-01C demand?

When depositing tax for DRC-01C, select ITC mismatch - GSTR-2A/2B to GSTR-3B as the cause of payment in Form GST DRC-03. This allows the GST portal to authenticate your payment ARN in Part B.

Reconcile your purchase register before filing GSTR-3B

Catch missing vendor invoices, identify timing differences, and verify ITC totals before filing your monthly return to avoid automated Rule 88D notices. Your GSTR-2B and purchase register files are read in your browser and never uploaded to any server.

Reconcile GSTR-2B →

Last checked: 18 October 2026. Sources: CBIC Tax Information Portal, GSTN DRC-01C Portal Advisory, GST Common Portal.