Last month’s GST Council meeting saw various new updates and revisions to the GST statute. In addition to making judgements on GST rates for goods and services, the Council also discussed the taxability of GST on casinos, online gaming, and horse racing. Furthermore, the Council proposed significant modifications to the GST statute to streamline GST compliance, notably the implementation of the DRC-01 forms for inconsistencies between GST returns.
A fresh notification issued this month recommended amending the Central Goods and Services Tax (CGST) Rules with a new form called DRC-01C. Here’s an explanation of what this new form covers and how it will affect your business.
- DRC-01C – Addressing discrepancies between the GSTR-2B and GSTR-3B.
- The taxpayer has two options for responding to the hint.
- What does this new legal reform entail for taxpayers?
- Receiving an intimation on Form DRC-01C can be harmful to taxpayers for a variety of reasons.
- Want to File GST Returns Complying all Relevant Provisions? Contact our Experts
DRC-01C – Addressing discrepancies between the GSTR-2B and GSTR-3B.
The addition of a new Rule 88D to establish how input tax credit (ITC) disparities in GST filings will be dealt with was proposed in Central Tax Notification 38/2023. The new rule states that if the amount of ITC claimed in the GSTR-3B exceeds the amount of ITC claimed in the GSTR-2B by the amount or percentage specified by the government, an auto-generated notification will be given to the taxpayer. Form DRC-01C will be used to send this notification.
The taxpayer has two options for responding to the hint.
The first option allows them to pay an amount equivalent to the excess ITC claimed in GSTR-3B, plus Section 50 interest. This must be paid using Form GST DRC-03. The second option is to explain why the ITC is different on the GST portal. It is vital to remember that regardless of which action the taxpayer chooses, they are required to respond using Part B of the same Form DRC-01C, and they must respond within seven days. If the taxpayer does not answer or if the response is deemed unacceptable by the tax officials, the department may commence demand and collection proceedings under GST law.
What does this new legal reform entail for taxpayers?
Form DRC-01C is not the first form used to automatically notify GST taxpayers of return anomalies. The government established a comparable Form DRC-01B a few months back for variations between the GSTR-1/IFF and the GSTR-3B. DRC-01C is a comparable form that affects taxpayers who do not reconcile their input tax credit each month prior to reporting their GSTR-3B.
Receiving an intimation on Form DRC-01C can be harmful to taxpayers for a variety of reasons.
In most situations, the intimation in Form DRC-01C is followed by a demand notice for the difference in ITC claimed, as well as interest payable under Section 50, hurting a business’s cash flows unnecessarily. Taxpayers will receive an intimation for the disparities between the GSTR-2B and GSTR-3B if they do not reconcile their input tax credit and communicate with suppliers on time, even if it is sometimes the vendors’ responsibility for not uploading invoices. If the taxpayer does not react within seven days, demand and collection processes under the GST law may be commenced, producing excessive stress and unbudgeted spending for the firm.
The introduction of the new Form DRC-01C emphasises the importance of timely reconciliations and proactive vendor communication, both of which may be easily accomplished with automated GST filing solutions. Return scrutiny that is automated encourages proactive rather than reactive compliance. Failure to recognise mismatches in a timely manner will only have a negative impact on the firm. Data auto-population, one-click reconciliations, and GST filings are examples of automated solutions that eliminate manual intervention and human errors.
Want to File GST Returns Complying all Relevant Provisions? Contact our Experts
Disclaimer: Please note that the content provided in this article is for educational purposes only and represents the author’s point of view. It is crucial to consult with a qualified financial advisor or tax professional before making any decisions based on the information provided. Your unique financial situation may require personalized guidance, and professional advice ensures accurate decision-making tailored to your specific needs.
