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How to Respond to Form DRC-01B Under GST
Anurag Mittal
Anurag Mittal, CEO and Co-founder of Olao Books, is an expert in business finance and operations, with a focus on transforming accounting and payroll solutions for small and medium-sized businesses. As the Co-founder and former Head of Operations and Business at Vervotech, Anurag played a pivotal role in driving 10x revenue growth and leading the company to a successful acquisition.
If you’re dealing with GST in India, you might come across Form DRC-01B. This form is a key part of the GST compliance process, used when the tax authorities want to clarify something about your returns. Knowing how to respond correctly is crucial to staying compliant and avoiding penalties. Let’s break down what Form DRC-01B is, why it’s issued, and how you can respond to it in a simple and effective way.
Form DRC-01B is essentially a notice from the GST authorities alerting you to some discrepancies in your tax returns. They might want an explanation or additional documents to support your claims. Ignoring this notice or responding incorrectly could lead to further scrutiny, penalties, or even suspension of your GST registration.
Why is Form DRC-01B Issued?
Here are the main reasons why you might receive Form DRC-01B:
- Discrepancies in Returns: If the GST authorities find differences between your filed returns (like GSTR-1, GSTR-3B, etc.) or mismatches between the Input Tax Credit (ITC) you claimed and what your suppliers reported, they’ll issue Form DRC-01B to get clarity.
- Failure to Pay Taxes: If you haven’t paid the full amount of GST due—whether by mistake or on purpose—you might get this form demanding payment or an explanation.
- Non-compliance with Previous Notices: If you haven’t complied with earlier notices or requirements from the GST authorities, this form could be a reminder to take action.
Common Mistakes to Avoid When Responding to Form DRC-01B
- Delayed Response: Always reply within the deadline to avoid penalties or more notices.
- Incomplete Documentation: Make sure you attach all relevant documents and provide clear explanations.
- Ignoring Minor Discrepancies: Even small errors can cause big issues. Address every point in the notice.
- Not Verifying Data: Double-check all entries and calculations to ensure everything is accurate.
Consequences of Not Responding to Form DRC-01B
If you ignore Form DRC-01B, you could face:
- Penalties or interest charges.
- Additional scrutiny or audits.
- Possible suspension or cancellation of your GST registration.
Best Practices for Responding to Form DRC-01B
- Timeliness: Always respond promptly within the deadline mentioned in the notice.
- Accuracy: Make sure all the information matches your previous filings.
- Clarity: Provide clear explanations and supporting documents for every point.
- Maintain Records: Keep a record of all communications, submissions, and acknowledgments related to Form DRC-01B for future reference.
Steps to Respond to Form DRC-01B
Responding to Form DRC-01B promptly and accurately is key. Here’s how you can do it step-by-step:
Steps to reply to the intimation in Form DRC-01B:
- Step 1 : Visit the GST portal and log in with your credentials (GSTIN, username, and password).
- Step 2 : Go to ‘Services’ > ‘Returns’ > ‘Return Compliance’. Alternatively, you may click on the ‘Return Compliance’ link available on the dashboard.
- Step 3 : Once the ‘Return Compliance’ page is displayed, click on the ‘View’ button under the ‘Liability Mismatch (DRC-01B)’ tile
- Step 4 : Click on the hyperlinked reference number on the ‘Liability Mismatch (DRC-01B)’ page
Note: If multiple reference numbers are shown, you can use any of the available options, such as ‘Reference number’, ‘Return period’, or ‘Status’, to locate the intimation issued to you under DRC-01B.
Reference number: To use the ‘Reference number’ option, enter the ARN and hit the ‘Search’ button. This will display both completed and pending records. Select the specific record you want to respond to.
Return period: If you choose the ‘Return period’ option, start by selecting the financial year for which you need to respond to Form DRC-01B, followed by the specific return period from the drop-down list. The options for the return period will only become available after selecting the financial year. Click the ‘Search’ button to display both completed and pending records. If the status shows as pending, you can proceed to file Form DRC-01B.
Status: If you click on the ‘Status’ option, select the status ‘Pending’ or ‘Completed’ from the drop-down list and click on the ‘Search’ button. You can file Form DRC-01B only for pending records.
The ‘Liability Mismatch (DRC-01B)’ page will contain two parts, Part A and Part B of the form.
Part A: ‘Intimation of Difference in Liability Reported in Statement of Outward Supplies and that Reported in Return’.
Part B: ‘Reply by Taxpayer in Respect of the Intimation of Difference in Liability’.
Note: You can download Part A of Form DRC-01B by clicking on the ‘Download DRC-01B Part A’ button.
The system-generated PDF will be downloaded.
- Step 5 : There are two sections within Part B. In Section 1, enter the ARN (Application Reference Number) of the payment made using Form DRC-03 for the period corresponding to the issued Form DRC-01B. After entering the ARN, click on ‘Validate.’
The summary of the payment details that have been paid towards the difference amount through the DRC-03 will be displayed.
Note 1: If you have entered the incorrect ARN, an error message will be displayed.
Double-check the following points:
- Ensure that the ARN is valid and corresponds to the same DRC-03 and GSTIN.
- Confirm whether the cause of payment specified in the DRC-03 is ‘Liability mismatch – GSTR-1 to GSTR-3B’.
- The DRC-03 should have been filed on or after the date that Part A of the DRC-01B was issued.
- The overall tax period should align with the period for which Part A of the DRC-01B was issued.
- For monthly filers, the period, including both the ‘From’ and ‘To’ dates, should be the same.
- For quarterly filers, it should cover at least one month within the quarter.
Note: You can complete Part B of Form DRC-01B either by making a payment and entering the ARN in Section 1, by providing a response in Section 2, or through a combination of both. It is important to note that entering the ARN from Form DRC-03 is not mandatory to file this form.
- Step 6: If you haven’t yet made the payment and wish to do the same, you can click on the ‘Click Here for DRC-03’ button.
- Step 7: In sub-part 2, you can select the reason for the difference in liability reported by clicking on the relevant checkbox and providing further explanations in the text box. If your reason is not specified, select the ‘Any other reasons’ checkbox and explain the reason in the space provided. You can use up to 500 characters to explain your reason.
- Step 8: Once the relevant details have been entered, click on the ‘Save’ button.
- Step 9: Preview the DRC-01B before filing.
It is important that you download and verify the details of your response before submitting the same. To download the draft order, click on the ‘Download DRC-01B’ button.
A system-generated draft order will be downloaded into your system. Check the same carefully to rule out any discrepancies.
- Step 10: Select the declaration checkbox at the bottom of the page. Select the name of the authorized signatory from the drop-down list and enter the place.
Note: The checkbox for selecting the declaration will be enabled only after saving the details in either sub-parts one and/or two of Part B of DRC-01B.
- Step 11: Click on the ‘File GST DRC-01B’ button.
This button will only become active after you have selected the name of the authorized signatory and entered the location. The designation/status and the date will be filled in automatically.
- Step 12: A warning message will appear. Click ‘Proceed’ to continue.
- Step 13: You can now proceed to file with EVC or DSC by clicking on either the ‘File DRC-01B with EVC’ or ‘File DRC-01B with DSC’ buttons.
Enter the OTP sent on the email ID and mobile number of the primary authorized signatory registered on the GST portal, and click on the ‘Verify’ button.
Step 14: You can check the status of Form DRC-01B from the ‘Status’ option mentioned in Step 4.
Conclusion
Responding to Form DRC-01B is a critical part of maintaining your GST compliance. By following these steps and avoiding common mistakes, you can handle discrepancies effectively and prevent any further complications with the tax authorities. Always review your documents thoroughly and stay in open communication with the GST department to address any queries that may come up after submission.
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Frequently Asked Questions
Form DRC-01B is a notice issued by GST authorities in India to address discrepancies between your filed GST returns, such as GSTR-1 and GSTR-3B, or unpaid GST liabilities.
You might receive Form DRC-01B if there are discrepancies in your returns, unpaid GST dues, or non-compliance with previous notices from GST authorities.
Respond promptly via the GST portal by accessing the 'Return Compliance' section. Provide accurate details, explanations, and any required supporting documents to address the discrepancies.
Ignoring Form DRC-01B can lead to penalties, interest charges, audits, or even suspension or cancellation of your GST registration.
Yes, you can correct mistakes by following the steps to respond in Part B of Form DRC-01B. You may need to make payments or provide explanations and documentation to support the corrections.