GST DRC-01C notice: how to reconcile and reply to an ITC mismatch
A DRC-01C tells you that the input tax credit claimed in GSTR-3B is higher than the ITC in GSTR-2B for a tax period. You have seven days to pay the excess or explain it. Here is what the intimation means, how to work out which invoices cause the difference, and how to prepare the Part B reply.
What a DRC-01C intimation is
FORM GST DRC-01C is an intimation issued under Rule 88D of the CGST Rules, 2017. The GST portal compares the ITC you claimed in GSTR-3B with the ITC available in your GSTR-2B for the same return period. When the claim is higher by more than the limit set on the recommendation of the GST Council, Part A of DRC-01C shows the difference, and Part B is where you respond.
Rule 88D was inserted by Notification No. 38/2023–Central Tax dated 4 August 2023, and GSTN announced the portal functionality in its advisory of 6 October 2023.
The intimation is not a demand, but it has consequences. Until you respond, the portal does not let you file GSTR-1 or IFF for later periods. An amount that is neither paid nor explained to the satisfaction of the proper officer can be demanded under section 73 or section 74 of the CGST Act.
- Rule
- Rule 88D, CGST Rules, 2017
- What is compared
- ITC claimed in GSTR-3B vs ITC available in GSTR-2B, for the same tax period
- Time to respond
- Within seven days of the intimation
- Ways to respond (Part B)
- Pay the excess, fully or partially, with interest through DRC-03, and/or give reasons for the rest
- If you do not respond
- GSTR-1 / IFF for later periods cannot be filed until you pay or reply
- If unpaid and unexplained
- The amount can be demanded under section 73 or 74
How to reconcile a DRC-01C, step by step
- 1
Read Part A carefully
Note the tax period and the difference for each tax head (IGST, CGST, SGST, cess). Your reconciliation has to add up to exactly these figures.
- 2
Collect the right files
Download GSTR-2B for the period from the portal, and for the neighbouring months as well, because invoices often appear in a later GSTR-2B. Keep the GSTR-3B as filed, and export the purchase register for the same period from Tally or Busy.
- 3
Match invoice by invoice
Pair each purchase with GSTR-2B on supplier GSTIN and invoice number, then compare the taxable value and each tax head. Include credit and debit notes.
- 4
Explain every unmatched amount
Typical causes: an invoice that appears in a later month’s GSTR-2B because the supplier filed late; ITC claimed now for an invoice that was in an earlier GSTR-2B; reverse-charge ITC claimed on the tax paid, worked out separately from GSTR-2B (GSTR-2B may include certain reverse-charge supplies; supplies from unregistered persons, and import of services, generally do not appear); import ITC not yet reflected; ITC shown as not available in GSTR-2B; an invoice in no GSTR-2B because the supplier has not filed; a different amount on the same invoice; and invoices in GSTR-2B that are not in the books, which reduce the gap.
- 5
Check that the lines add up
Total each cause per tax head. Together they must equal the difference in Part A. If they do not, something is still unmatched.
- 6
Decide what to pay and what to explain
For each line, decide whether the ITC is correctly claimed (explain) or should be reversed (pay). Any payment goes through DRC-03 with interest; keep the ARN.
- 7
File Part B within seven days
Enter the DRC-03 payment details and/or choose the reasons for the rest (the form lists reasons such as ITC not availed in earlier periods, import ITC not reflected in GSTR-2B, and GSTR-3B filed with incorrect details, plus “other reasons”). Keep an annexure of the invoices behind each line.
Illustrative example · not a real taxpayer
Example: a ₹96,000 DRC-01C, line by line
Tax period September 2025. ITC claimed in GSTR-3B ₹4,86,000; ITC available in GSTR-2B ₹3,90,000; difference in Part A ₹96,000. After matching the purchase register with GSTR-2B for September and the following months:
Why the difference arises
Invoices booked in September that appear in October’s GSTR-2B (supplier filed late)
- Amount
- ₹54,000
- Treatment
- Explain
Why the difference arises
Reverse-charge ITC on services from an unregistered supplier (tax paid in cash; not in GSTR-2B)
- Amount
- ₹18,000
- Treatment
- Explain
Why the difference arises
Invoices not in any GSTR-2B so far (supplier has not filed)
- Amount
- ₹27,000
- Treatment
- Pay
Why the difference arises
Invoice in GSTR-2B but not in the books (reduces the gap)
- Amount
- −₹3,000
- Treatment
- Explain
Total = difference in the notice
₹96,000
Explain ₹69,000 · Pay ₹27,000
Illustrative figures for a fictional business, shown as totals across tax heads for readability; a real reply states each tax head. The treatment shown is one possible view: whether to pay or explain depends on the facts, and is the Chartered Accountant’s decision. Any amount paid goes through DRC-03 with applicable interest.
Frequently asked questions
What is a DRC-01C notice?
It is an intimation under Rule 88D of the CGST Rules that the input tax credit claimed in GSTR-3B for a tax period is higher than the ITC available in GSTR-2B by more than the prescribed limit. Part A shows the difference; you respond in Part B.
How many days do I have to reply to DRC-01C?
Rule 88D asks you to pay the excess ITC or explain the difference within seven days of the intimation.
What happens if I do not reply?
GSTN’s advisory states that taxpayers who do not respond will not be able to file GSTR-1 or IFF for the subsequent period. Under Rule 88D, an amount that remains unpaid and unexplained can be demanded under section 73 or section 74 of the CGST Act.
Can I pay part of the difference and explain the rest?
Yes. Rule 88D allows you to pay the excess fully or partially, with interest, through DRC-03, and to give reasons in Part B for the part you do not pay.
Is DRC-01C a show-cause notice?
No. It is an intimation asking you to pay or explain. Proceedings under section 73 or 74 can follow if the amount is neither paid nor explained to the satisfaction of the proper officer.
What difference triggers a DRC-01C?
Rule 88D applies when the excess is more than an amount and percentage recommended by the GST Council. GSTN describes these as predefined limits; this guide does not quote a figure.
How is DRC-01C different from DRC-01B?
DRC-01C is about input tax credit (GSTR-3B vs GSTR-2B). DRC-01B is about output tax: the liability declared in GSTR-1 or IFF being higher than the tax paid in GSTR-3B.
How does CATools help with a DRC-01C?
Upload the DRC-01C, GSTR-2B and your purchase register as exported from Tally or Busy. CATools matches them invoice by invoice, places every rupee of the difference on a line, and drafts the Part B reply with an invoice annexure and an Excel workbook. You choose Explain or Pay for each line and file on the portal yourself; CATools never asks for your GST portal password.
Reply to your DRC-01C with every rupee explained
Upload the notice and your files; CATools matches them invoice by invoice and drafts the Part B reply. You review, decide and file.
Sources
- Rule 88D, CGST Rules, 2017, inserted by Notification No. 38/2023–Central Tax dated 4 August 2023
- GSTN advisory: introduction of compliance pertaining to DRC-01C (6 October 2023)
- GST portal FAQs: return compliance in Form DRC-01C
Last reviewed 26 October 2026. This guide explains the rules in general terms. It is not legal advice; treatment of each item is for the Chartered Accountant to decide.