GSTN has issued advisory dated 29th June 2023 for Online Compliance Pertaining to Liability / Difference Appearing in GSTR1 - GSTR3B (DRC-01B).
It is informed that GSTN has developed a functionality to enable the taxpayer to explain the difference in GSTR-1 & 3B return online as directed by the GST Council. This feature is now live on the GST portal.
The functionality compares the liability declared in GSTR-1/IFF with the liability paid in GSTR-3B/3BQ for each return period. If the declared liability exceeds the paid liability by a predefined limit or the percentage difference exceeds the configurable threshold, taxpayer will receive an intimation in the form of DRC-01B.
Upon receiving an intimation, taxpayer must file a reply in Form DRC-01B Part B, providing clarification through reason in automated dropdown and details regarding the discrepancy, if not included in the dropdown.
To further help taxpayer with the functionality, a detailed manual containing the navigation details is available on the GST portal. It offers step-by-step instructions and addresses various scenarios related to the functionality.
Background
Section 75(12) of the CGST Act, 2017 allows for recovery of tax without the issuance of a Show Cause Notice under Section 73/74 of the CGST Act, 2017 where any amount of tax is self-assessed in accordance with the return furnished under Section 39 of the CGST Act, 2017.
An explanation was added to the said sub-section vide section 114 of the Finance Act, 2021 which has come into force on 1st January 2022 vide Notification No. 39/2021 - Central Tax dated 21st December, 2021 wherein the expression "self assessed tax" shall include the tax payable in respect of details of outward supplies furnished under section 37, but not included in the return furnished under section 39.
Doubts had been raised by the trade and the field formations regarding modalities for initiation of the recovery proceedings under section 79 of the Act in the cases covered under the explanation to sub-section (12) of section 75 of the Act.
Hence, CBIC issued guidelines i.e. Instruction No. 01/2022-GST dated 7th January 2022 for recovery proceedings under the provisions of section 79 of the CGST Act,2017 in cases covered under explanation to sub-section (12) of section 75 of the CGST Act,2017.
There may be some cases where there may be a genuine reason for difference between the details of outward supplies declared in GSTR-1 and those declared in GSTR-3B. For example, the person may have made a typographical error or may have wrongly reported any detail in GSTR-I or GSTR-3B. Such errors or omissions can be rectified by the said person in a subsequent GSTR-I/ GSTR-3B as per the provisions of sub-section (3) of section 37 or the provisions of sub-section (9) of section 39, as the case may be. There may also be cases, where a supply could not be declared by the registered person in GSTR-I of an earlier tax period, though the tax on the same was paid by correctly reporting the said supply in GSTR-3B. The details of such supply may now be reported by the registered person in the GSTR-I of the current tax period. In such cases, there could be a mis-match between GSTR-l and GSTR-3B (liability reported in GSTR-I> tax paid in GSTR-3B) in the current tax period. Therefore, in all such cases, an opportunity needs to be provided to the concerned registered person to explain the differences between GSTR-I and GSTR-3B, if any, and for short payment or non-payment of the amount of self-assessed tax liability, and interest thereon, before any action under section 79 of the Act is taken for recovery of the said amount.
Accordingly, where ever any such amount of tax, self-assessed by the registered person in his outward supply statement GSTR-I is found to be short paid or not paid by the said person through his GSTR-3B return in terms of the provisions of sub-section (12) of section 75 of the Act, the proper officer may send a communication (with DIN, in terms of guidelines issued vide circular No. 122/41/2019-GST dated 5th November 2019) to the registered person to pay the amount short paid or not paid, or to explain the reasons for such short payment or non-payment of self-assessed tax, within a reasonable time, as prescribed in the communication. If, the concerned person is able to justify the differences between GSTR-I and GSTR-3B, or is able to explain the reasons of such short-payment or non-payment of tax, to the satisfaction of the proper officer, or pays the amount such short paid or not paid, then there may not be any requirement to initiate proceedings for recovery under section 79.
However, if the said registered person either fails to reply to the proper officer, or fails to make the payment of such amount short paid or not paid, within the time prescribed in the communication or such further period as may be permitted by the proper officer, then the proceedings for recovery of the said amount as per provisions of section 79 may be initiated by the proper officer. Further, where the said registered person fails to explain the reasons for such difference/ short payment of tax to the satisfaction of the proper officer, then the proper officer may proceed for recovery of the said amount as per provisions of section 79.
Further, The Law Committee in its meetings held on 05.11.2022, 23.11.2022 and 05.12.2022 deliberated upon ways to safeguard revenue by finding suitable manner of handling and controlling the difference in liabilities reported between FORM GSTR-1 and FORM GSTR-3B by the taxpayers. Law Committee felt that considering large number of taxpayers involved, such a mechanism should be based on system based identification of the taxpayers based on certain approved risk criteria and a procedure of auto-compliance on the part of the taxpayers to explain/ take remedial action in respect of such difference.
The Law Committee opined that where the tax liability as per FORM GSTR-1 for a tax period exceeds the tax liability as per FORM GSTR-3B for that period by more than a certain extent, the registered person maybe intimated on the portal of such difference and be directed to either pay the differential tax liability along with interest, or explain the difference. Unless he either deposits the amount specified in the said intimation or furnishes a reply explaining the reasons for any amount remaining unpaid, such a person may not be allowed to furnish the details of outward supplies in FORM GSTR-1 or using invoice furnishing facility for a subsequent tax period. However, in cases where the taxpayer deposits the said differential tax liability only partly, with or without an explanation for such short payment, a separate procedure may be formulated for examination of such cases by the proper officer, and for further action for recovery of the unpaid amount in accordance with the provisions of Section 79, to the extent no satisfactory explanation has been provided by the taxpayer for such differential unpaid amount.
To implement the said approach, the Law Committee recommended as follows:
(i) Insertion of new Rule 88C to communicate the difference between FORM GSTR-1 and FORM GSTR-3B and to direct payment of the differential or explain the difference:
(ii) Insertion of a new clause (d) in sub-rule (6) of Rule 59 to enable blocking of FORM GSTR-1 for a subsequent tax period unless the taxpayer has deposited the amount specified in the intimation or has furnished a reply explaining the reasons for any amount remaining unpaid:
(iii) FORM GST DRC-01B may be inserted as required under Rule 88C(1).
(iv) To begin with, difference between liability declared in FORM GSTR-1 & that declared in FORM GSTR-3B of more than 20% as well as more than Rs. 25 lakhs may be taken for the purpose of intimation under proposed Rule 88C(1).
(v) Law Committee to formulate a separate procedure for examination of such cases by the proper officer, where the taxpayer deposits the differential tax liability only partly, with or without an explanation for such short payment, and for further action for recovery of the unpaid amount in accordance with the provisions of Section 79, to the extent no satisfactory explanation has been provided by the taxpayer for such differential unpaid amount.
Accordingly, The 48th GST Council under the Chairmanship of Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman, had inter-alia made the recommendations that Rule 88C and FORM GST DRC-01B to be inserted in CGST Rules, 2017 for intimation to the taxpayer, by the common portal, about the difference between liability reported by the taxpayer in FORM GSTR-1 and in FORM GSTR-3B for a tax period, where such difference exceeds a specified amount and/ or percentage, for enabling the taxpayer to either pay the differential liability or explain the difference. Further, clause (d) to be inserted in sub-rule (6) of rule 59 of CGST Rules, 2017 to restrict furnishing of FORM GSTR-1 for a subsequent tax period if the taxpayer has neither deposited the amount specified in the intimation nor has furnished a reply explaining the reasons for the amount remaining unpaid. This would facilitate taxpayers to pay/ explain the reason for the difference in such liabilities reported by them, without intervention of the tax officers.
Further, The rule 88C was inserted w.e.f. 26.12.2022 vide Central Goods and Services Tax (Fifth Amendment) Rules, 2022 - Notification No. 26/2022Central Tax dated 26th December 2022. The same is reproduced as -
"Rule 88C. Manner of dealing with difference in liability reported in statement of outward supplies and that reported in return.
(1) Where the tax payable by a registered person, in accordance with the statement of outward supplies furnished by him in FORM GSTR-1 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, electronically on the common portal, and a copy of such intimation shall also be sent to his e-mail address provided at the time of registration or as amended from time to time, highlighting the said difference and directing him 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.
(2) The registered person referred to sub-rule (1) shall, upon receipt of the intimation referred to in that sub - rule, either,-
(a) pay the amount of the differential tax liability, as specified in Part A of FORM GST DRC-01B, fully or partially, along with interest under section 50, through FORM GST DRC-03 and furnish the details thereof in Part B of FORM GST DRC-01B electronically on the common portal; or
(b) furnish a reply electronically on the common portal, incorporating reasons in respect of that part of the differential tax liability that has remained unpaid, if any, in Part B of FORM GST DRC-01B, within the period specified in the said sub-rule.
(3) Where any amount specified in the intimation referred to in sub-rule (1) remains unpaid within the period specified in that sub-rule and where no explanation or reason is furnished by the registered person in default or where the explanation or reason furnished by such person is not found to be acceptable by the proper officer, the said amount shall be recoverable in accordance with the provisions of section 79."
Further, In rule 59, in sub-rule (6), after clause (c), the following clause has been inserted w.e.f. 26.12.2022 vide Central Goods and Services Tax (Fifth Amendment) Rules, 2022 - Notification No. 26/2022 Central Tax dated 26th December 2022. The same is reproduced as -
Rule 59. Form and manner of furnishing details of outward supplies -
"6 (d). a registered person, to whom an intimation has been issued on the common portal under the provisions of sub-rule (1) of rule 88C in respect of a tax period, shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM GSTR-1 or using the invoice furnishing facility for a subsequent tax period, unless he has either deposited the amount specified in the said intimation or has furnished a reply explaining the reasons for any amount remaining unpaid, as required under the provisions of sub-rule (2) of rule 88C."
Now, GSTN has issued advisory dated 29th June 2023 for Online Compliance Pertaining to Liability / Difference Appearing in GSTR1 - GSTR3B (DRC-01B) and informed that GSTN has developed a functionality to enable the taxpayer to explain the difference in GSTR-1 & 3B return online as directed by the GST Council which is now live on the GST portal.
Important Questions
1. When can Form DRC-01B be filed?
The system checks the spike between the liability declared in form GSTR-1/IFF and the liability paid in GSTR-3B/3BQ for each return period. If the liability declared in GSTR-1 exceeds the liability paid in Form GSTR-3B by a pre-defined limit for a return period or the percentage difference between the liabilities declared in GSTR-1 exceeds the configurable percentage threshold from the liability paid in Form GSTR-3B for a return period, an intimation is sent to you.
Once you receive an intimation in Form DRC-01B, i.e., if there is a difference between the liability declared in GSTR-1/IFF and that paid through GSTR-3B/3BQ beyond the configurable threshold limit, you need to submit your reply in Form DRC-01B Part B.
Note: If a taxpayer doesn't file response to Form GST DRC-01B for previous tax period, then for the subsequent tax period, they will not be able to file their Form GSTR-1/IFF.
2. On which class of taxpayers is Form DRC-01B applicable?
Form DRC-01B is applicable to various types of taxpayers, including regular taxpayers (including SEZ units and SEZ developers), casual taxpayers, and taxpayers who have opted in or opted out of the composition scheme.
3. I have not filed the Form DRC-01B for the previous Tax period. Can I still file GSTR1/IFF for the current Tax period?
If you have not filed Form DRC-01B Part B for any period for which you received an intimation in Form DRC-01B Part A, you will not be able to file GSTR-1/IFF for the subsequent period. It is important to ensure timely filing of Form DRC-01B Part B to avoid any interruptions in the filing of GSTR-1/IFF.
4. How will I be intimated that I have to submit reply in Form DRC-01B Part B?
Once the intimation in Form DRC-01B Part A is generated, a Reference Number will be assigned. You will receive the intimation via email and SMS, which will include the Reference Number. Please ensure to check both your email and mobile messages for the intimation and keep the Reference Number handy for future reference and correspondence.
Note: You can also check this intimation on GST Portal. Navigate to Services > Returns > Return Compliance > Liability Mismatch DRC-01B.
5. Can Form DRC-01B Part B be filed monthly or quarterly?
For quarterly filers (QRMP), Form DRC-01B will be generated, if applicable, after filing the quarterly GSTR-3B. On the other hand, for monthly filers, Form DRC-01B will be generated on a monthly basis after filing the monthly GSTR-3B. Therefore, Form DRC-01B Part B can be filed either on a monthly or quarterly basis, depending on the frequency of filing GSTR-3B.
6. After filing the reply for DRC-01B Part B, how much time will it take to unblock the form GSTR-1/IFF?
When will I be able to file GSTR-1/IFF? After filing the reply for DRC-01B Part B, you can instantly file GSTR-1/IFF. If you are facing any issue while filing GSTR-1/IFF, then you need to log out and log in again after a few minutes.
8. How can I deselect any reason for the payment difference, after providing the details for the reason selected earlier?
If you deselect any reasons for difference after providing the details, the system will display an error message, requesting for deletion of details already provided. So, after deleting the details entered for the reason selected earlier, you will be able to deselect that reason.
9. How can I file Form DRC-01B PART B?
The link is stated below:
https://tutorial.gst.gov.in/downloads/news/return_compliance_in_form_drc_01b.pdf wherein a detailed procedure has been explained for the stakeholders.
All stakeholders are advised for proper compliance upon receiving an intimation, by filing a reply in Form DRC-01B Part B as where no action is taken against the issuance of DRC-01B, there would be blocking of GSTR-1/IFF along with initiation of recovery proceedings under Section 79 of the CGST Act, 2017.
