Last month’s GST Council meeting saw various new updates and revisions to the GST law. In addition to making judgments on GST rates for goods and services, the Council also discussed the taxability of GST on casinos, internet gambling, and horse racing. Furthermore, the Council proposed significant modifications to the GST statute to streamline GST compliance, notably the introduction 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 Is A New Form Addressing Differences 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 would be dealt with was proposed in Central Tax Notification 38/2023. The new regulation states that if the amount of ITC claimed in GSTR-3B exceeds the amount of ITC claimed in 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 Can Respond To The Intimation In Two Ways
- The first option permits them to pay a sum equivalent to the excess ITC claimed in GSTR-3B, plus Section 50 interest. This must be paid using Form GST DRC-03.
- The second alternative is to explain why the ITC is different on the GST portal.
It is vital to remember that regardless of the action the taxpayer selects, 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 actions under GST legislation.
What Does This New Change In The Law Mean For Taxpayers?
Form DRC-01C is not the first form used to automatically notify GST taxpayers of return mismatch. 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 document that affects taxpayers who do not reconcile their input tax credit each month prior to reporting their GSTR-3B.
Receiving An Intimation In Form DRC-01C Can Be Detrimental To Taxpayers For Several 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 needlessly.
- 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 though it is sometimes the vendors’ responsibility for not filing invoices.
- If the taxpayer does not react within seven days, demand and collection processes under the GST legislation may be commenced, producing excessive stress and unbudgeted spending for the firm.
The introduction of the new Form DRC-01C emphasizes the importance of timely reconciliations and proactive vendor dialogue, both of which may be readily accomplished with automated GST filing systems.
Failure to recognize 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 involvement and human mistakes.