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First identify the communication. An automated Form GST DRC-01C intimation about a difference between input tax credit (ITC) available in GSTR-2B and ITC claimed in GSTR-3B or 3BQ is handled differently from a statutory show-cause notice under section 73 of the CGST Act. Download the actual communication, note its form number, tax period, amount, issuing authority and deadline, then reconcile the disputed credit invoice by invoice before choosing whether to explain, correct or reverse, pay, or combine those actions.
GSTR-2B is an important data source, not a complete legal decision on eligibility. The conditions in section 16 and other restrictions still apply even when a credit appears in the statement. The practical objective is to create a traceable reconciliation, respond through the route named in the communication, and preserve evidence of what you filed.
What kind of GST communication did you receive?
The phrase “GST notice” covers different documents. Read the heading and form number rather than assuming every mismatch message is a demand or a show-cause proceeding.
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GST portal guidance describes DRC-01C as an automated intimation of a difference between ITC available in GSTR-2B and ITC claimed in GSTR-3B/3BQ. Its response is filed in Part B. The portal manual provides options to enter payment details, an explanation, or both. The manual also states that Part B is mandatory and that failure to respond prevents filing GSTR-1 or the invoice furnishing facility (IFF) for the subsequent tax period.
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Section 73 show-cause notice
A notice under section 73 is a separate statutory step for specified non-fraud cases, including wrongly availed or utilised ITC. It may require a formal defence and can lead to an order if the matter is not resolved. The allegations, tax period, limitation rules, statutory provisions cited and deadline in that notice control your response. Do not answer a section 73 notice with a short DRC-01C-style explanation alone.
| Issue | DRC-01C intimation | Section 73 show-cause notice |
|---|---|---|
| Nature | Automated mismatch communication comparing system data | Statutory proceeding concerning specified non-fraud tax, including wrongly availed or utilised ITC |
| What to check | Part B response requirement, periods and amount shown on the portal | Notice allegations, legal provisions, authority, tax period, limitation and hearing or reply deadline |
| Possible response | Payment details, explanation, or both, supported by reconciliation | Item-by-item defence, accepted corrections or payment, legal submissions and evidence |
| Immediate exposure | Non-response can block the next period’s GSTR-1/IFF filing according to the portal manual | Failure to answer can allow the statutory process to proceed toward an order and recovery |
Keep the two paths separate in your internal tracker. A DRC-01C is not, by its label alone, a final determination that every difference is ineligible. Conversely, an explanation prepared for DRC-01C does not remove obligations under a separate statutory notice.
What to do on the day you receive the communication
- Preserve the original record. Download the PDF or portal view, attachments, notice history, delivery details and any document reference identifier. Save the files in a folder named for the GSTIN and tax period. Take a dated screenshot of the portal status if the message is visible online.
- Record the controlling details. Write down the form number, issuing authority, date of issue, response deadline, tax period or periods, tax heads (IGST, CGST, SGST or cess), amount shown, and the stated basis for the difference. Do not substitute a presumed standard deadline for the date printed on your communication.
- Authenticate through the official portal. Sign in to the GST portal and verify that the communication appears in the relevant return-compliance or notice area. Treat an email or attachment that cannot be matched to portal records as unverified until checked.
- Protect the deadline. Assign an owner, a reviewer and a backup. If records are incomplete, prepare a defensible interim position and seek qualified Indian GST advice where the amount, legal eligibility or procedural risk is material.
Build the records before deciding what to admit
Download the GSTR-2B statement used for each period, not merely the latest summary. Assemble the corresponding GSTR-3B returns, purchase register, tax invoices and debit or credit notes, supplier communications, goods-receipt or service evidence, payment and accounting records, and prior reversal and reclaim workings. Include amendments and records showing when a supplier filed or corrected information.
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Reconcile GSTR-2B and GSTR-3B at invoice level
A total-level difference is a starting signal, not proof that every invoice is wrong. Use a spreadsheet or accounting export with one row per document and columns for the following fields:
- Supplier GSTIN and your GSTIN
- Invoice, debit-note or credit-note number and date
- Taxable value and each tax head amount
- Book date, GSTR-2B period and GSTR-3B claim period
- Amendment or original-document indicator
- Place of supply and whether the transaction is intra-state or inter-state
- Eligibility decision, reversal or reclaim amount, and evidence reference
Match document number and date after normalising spaces, punctuation and leading zeroes. Then compare values and tax heads. Investigate unmatched rows in both directions: items in the books but absent from GSTR-2B, and items in GSTR-2B that were never recorded or claimed.
Check timing and supplier filing
A supplier may have filed an invoice, amendment or credit note after your books were closed or after you filed GSTR-3B. GST portal guidance notes that information declared or amended through GSTR-1A becomes available to the recipient in the next tax period’s GSTR-2B. A timing difference can therefore move an otherwise supported invoice between periods. Document the supplier’s filing date, the statement period in which it appeared and the period in which you claimed or intend to claim the credit.
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Check duplicate and amended documents
Search for an original invoice and its amendment, duplicate uploads, and credit or debit notes that change the net credit. A duplicate claim can create a genuine excess even when each individual document looks valid. Show the original, adjustment and net amount in separate spreadsheet rows so the reviewer can follow the calculation.
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Check identity and place-of-supply data
Verify the supplier GSTIN, your registration, invoice number, date and place of supply. A wrong GSTIN can put another recipient’s invoice in your statement or leave your invoice unmatched. A place-of-supply error can also change the tax head and affect the way the credit was reported.
Separate reverse-charge transactions
GSTN’s April–June 2024 functionality compilation states that reverse-charge ITC reported in table 4A(3) was excluded from the DRC-01C comparison. That exclusion does not make reverse-charge credit automatically eligible; account for the tax payment, documentation and section 16 conditions separately.
Identify reversals and later reclaims
Trace temporary reversals, subsequent reclaims, credit notes, payment-related reversals and any corrections carried into later returns. A claim in one period and a reversal in another can look like an excess when the periods are viewed independently. Link each entry to the return table and working paper where it was recorded.
Decide whether each difference is eligible, correctable or payable
Classify every row and quantify the tax head impact. Do not use the GSTR-2B “not available” indicator as the sole eligibility test. GSTN’s GSTR-2B guidance cautions that the summary covers only specified cases; other legal restrictions can apply even when the system does not flag them. Section 16 provides the statutory eligibility conditions, so perform a self-assessment against the Act and your evidence.
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| Classification | Typical treatment | Evidence to retain |
|---|---|---|
| Eligible and supported | Explain the timing, amendment or data reason and retain the credit in accordance with the law | Invoice, receipt or service evidence, books, statement and reconciliation row |
| Eligible but in a different period | Explain the period movement and identify the statement and return in which it appears | Supplier filing timeline, both period statements and return workings |
| Supplier correction required | Ask the supplier to amend or report the document; state the resulting treatment and expected period | Supplier correspondence, original document and amendment evidence |
| Ineligible or unsupported | Reverse or pay the appropriate amount through the route permitted by the communication and record the accounting entry | Reason for ineligibility, calculation and payment or reversal proof |
| Duplicate, credit-note or amendment error | Remove the duplicate or net the adjustment; explain how the corrected figure was derived | Linked original and amended documents and calculation |
Use a separate column for “amount accepted for correction” and “amount disputed.” This prevents a defensible explanation for supported invoices from being confused with an admission of the entire aggregate.
How to file a DRC-01C Part B response
Use the current portal labels shown for your GSTIN. The GSTN manual’s navigation is:
- Sign in to the official GST portal.
- Open Services > Returns > Return Compliance.
- Open the ITC Mismatch tile for the relevant communication.
- Review the periods, figures and system comparison displayed by the portal.
- Choose the response option: enter payment details, provide an explanation, or provide both, as applicable.
- Attach or upload the reconciliation and supporting documents if the portal permits or requests them. Keep filenames clear and within the portal’s size and format limits.
- Submit Part B using the authorised signatory or applicable verification method.
- Download the acknowledgement and filed response, then save them with the underlying workbook.
The portal manual says Part B is mandatory. Because non-response can prevent filing GSTR-1 or IFF for the subsequent tax period, do not leave the tile unattended while investigating the records. If the portal shows a technical error, capture the error, time and reference number, raise it through the GST help channel and preserve proof of the attempt before the deadline.
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Start with a paragraph-by-paragraph matrix. Copy each allegation into an internal column, then add your factual response, legal basis, amount accepted or disputed, and document reference. Address the following separately:
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- Whether the invoice or document exists and relates to your business.
- Whether the credit was reported in the correct return period and tax head.
- Whether supplier reporting or amendment timing explains the apparent difference.
- Whether any reversal, credit note, payment condition or other section 16 requirement applies.
- How the department’s computation differs from your invoice-level computation.
- What amount, if any, you will correct or pay and under which permitted procedure.
Section 73 concerns specified non-fraud cases, but the applicable limitation, interest, penalty and procedural rights depend on the particular notice and tax period. Do not assume that a DRC-01C response satisfies a show-cause notice, or that payment of an undisputed amount resolves disputed legal issues. Obtain qualified professional review when the proceeding is formal, the amount is significant, or eligibility turns on a contested interpretation.
Common causes of an ITC mismatch
- Supplier filed the invoice or amendment after the recipient’s return was filed.
- GSTR-1A information appeared in the next tax period’s GSTR-2B.
- Invoice, debit note or credit note was duplicated or omitted in the books.
- Supplier GSTIN, recipient GSTIN, invoice number, date or place of supply was wrong.
- Books and returns use different tax periods or tax-head classifications.
- Credit was reversed and later reclaimed, but the two entries were not linked.
- Reverse-charge credit was mixed into a comparison that excludes table 4A(3).
- The credit appears in GSTR-2B but is blocked or otherwise ineligible under the law.
- An invoice was reported in GSTR-2B but never received, recorded or paid for in the business records.
Response quality checks before submission
- Every amount in the reply ties to a row in the reconciliation and to a return table.
- IGST, CGST, SGST and cess totals are not netted in a way that hides the tax head.
- Credit notes, amendments, reversals and reclaims are shown chronologically.
- The reply distinguishes a data or timing explanation from a legal eligibility argument.
- Accepted, corrected, paid and disputed amounts add to the communication’s total, or the difference is explicitly explained.
- Attachments open correctly and contain no unrelated taxpayer data.
- The authorised signatory, filing date and acknowledgement are recorded.
- The next GSTR-1/IFF filing is monitored after a DRC-01C response.
Record retention and follow-up
Keep the filed response, acknowledgement, notice and portal history together with the reconciliation workbook, source GSTR-2B and GSTR-3B records, invoices, supplier follow-up, payment evidence and reversal or reclaim entries. Preserve the version of each statement used for the response. Calendar any promised supplier amendment, later-period reclaim or department communication, and update the file when that event occurs.
Portal procedures and tax law can change. The GSTN manuals and guidance cited here were accessed on 13 October 2026; verify the current portal screen, applicable law and the communication’s own deadline for your tax period.
The Bottom Line
Handle an ITC mismatch as an evidence and classification exercise: identify DRC-01C versus a section 73 notice, reconcile GSTR-2B to books and GSTR-3B invoice by invoice, separate eligible timing differences from ineligible or duplicate credit, and file the required response before the stated deadline. Keep the acknowledgement and working papers, and obtain qualified GST advice when the amount or legal issue is material.
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