There are primarily two kinds of GST returns which most taxpayers have to file. The first one is GSTR-1 which is filed by around 13th of every month (dates may vary based on category of taxpayer). This return merely shows your sale invoices and thus shows your GST liability on sale. This return also helps in transferring your sales data, into your customer’s GST portal, as his purchase. This data when reflected in your customer’s GST portal as purchases makes your customer eligible for input tax credit.
The liability shown in GSTR 1, is paid by you via the GSTR return called GSTR 3B. GSTR 3B is typically filed by 20th of the month i.e. a few days after GSTR 1 (dates may vary based on category of taxpayer). Thus the liability declared in GSTR 1, ideally remains same in GSTR 3B, and then gets paid in GSTR 3B.
As per law, your customer should be able to claim the credit of GST only once you pay the GST to the government. This makes logical sense as well. However, as we have seen above, the transferring of GST credit to your customer happens through GSTR 1 whereas the payment of GST happens through GSTR 3B. Thus, some miscreant supplier can upload sales of Rs 1 lakh in GSTR 1, thus allowing his customers to see GST credit pertaining to Rs 1 lakh. But in his GSTR 3B, he may pay GST only on say Rs 60000, thus the government has been short paid Rs 40,000, whereas this same Rs 40,000 has been claimed as credit by the customers of this miscreant supplier.
But again, as mentioned before, the law says that a customer can claim credit only if the supplier has paid GST. Thus the GST department eventually would go to the customer and tell him that since his supplier has not paid the GST, he cannot claim the GST credit. This is already happening in cases pertaining to earlier financial years.
Thus, to prevent this misuse of the system, the GST law had brought some changes in December 2022 vide Rule 88C. These changes are now being implemented on the GST portal.
Now, the GST portal will check if there is a difference between the GST liability as shown in GSTR 1 vs the GST liability as shown in GSTR 3B. If the declared liability exceeds the paid liability by a predefined limit or the percentage difference exceeds the configurable threshold, taxpayer will receive intimation in the form of DRC-01B.
Once the intimation in form DRC-01B Part A is generated, a reference number will be assigned. The taxpayer will receive the intimation via email and SMS, which will include the reference number. Taxpayer should check both email and mobile messages for the intimation and keep the reference number handy for future reference and correspondence.
Taxpayer can also check this intimation on GST Portal. Navigate to Services > Returns > Return Compliance > Liability Mismatch DRC-01B.
Upon receiving intimation the taxpayer must file a response using form DRC-01B Part B. The taxpayer has the option to either provide details of the payment made to settle the difference using form DRC-03, or provide an explanation for the difference, or even choose a combination of both options.
If the taxpayer has not filed Form DRC-01B Part B for any period for which he has received intimation in form DRC-01B Part A, then the taxpayer will not be able to file GSTR-1 for the subsequent period. Thus, it is important to ensure timely filing of form DRC-01B Part B to avoid any interruptions in the filing of GSTR-1. After filing the reply for DRC-01B Part B, the taxpayer can instantly file GSTR-1/IFF.
Where any amount specified in the intimation referred above remains unpaid within seven days 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 from the taxpayer by the officer.
The writer, a Fellow Chartered Accountant (FCA) specializing in Goods, Services Tax, Transfer Pricing and Income Tax, is the co-author of the book ‘Compendium of Industrial Policy for MSMEs in Goa’ released by ICAI