For most of GST’s life, a mismatch between your own returns was something the department found during scrutiny, if it found it at all. That is no longer the case. The portal now runs two comparisons automatically, every period, on every registration, and writes to you when the numbers do not agree.
Neither is a show cause notice. Both are intimations, which sounds mild and is not, because failing to answer one stops you filing your next GSTR-1.
The two comparisons
Rule 88C, answered in DRC-01B, compares your output tax. What you declared as liability in GSTR-1 against what you declared in GSTR-3B. If GSTR-1 is higher by more than the threshold, you have reported sales you have not paid tax on.
Rule 88D, answered in DRC-01C, compares your input tax credit. What you claimed in GSTR-3B against what GSTR-2B made available. If GSTR-3B is higher by more than the threshold, you have claimed credit the portal cannot see a basis for.
Both arrive as Part A of the relevant form. Both require Part B in reply. Both, if left unanswered past the period allowed, trigger Rule 59(6) and block your next GSTR-1.
That blocking is the part that concentrates attention. A blocked GSTR-1 means your customers do not get their credit, which means their reconciliations break and their accounts teams start calling yours. A ₹12,000 mismatch you were planning to look at next week becomes an urgent problem because a customer cannot claim ₹4 lakh of credit.
DRC-01B: liability declared and not paid
The reasons this arises are usually mundane.
An amendment recorded in one return and not the other. A B2B invoice amended in GSTR-1 without the corresponding change flowing into 3B.
Credit notes applied inconsistently. Reduced in 3B in one month and reported in GSTR-1 in another.
Reverse charge presentation. Supplies where the recipient pays under Section 9(3) or 9(4) appear in GSTR-1 but carry no liability for you in 3B. This is a correct position that looks like a mismatch, and it needs to be said in the reply rather than assumed to be obvious.
Section 9(5) e-commerce supplies. Where the operator is liable, your GSTR-1 and your 3B liability legitimately differ.
A genuine short payment. Sometimes the answer is simply that the tax was not paid.
The reply in Part B lets you either pay the difference through DRC-03, or give reasons, or both. If part of the gap is genuine and part is explicable, say so and split it. A partial payment with a clear explanation of the balance is a normal and acceptable reply.
The reason to take this seriously beyond the filing block is Section 75(12). Tax that is self-assessed and unpaid can be recovered directly under Section 79, without a show cause notice under Section 73 or 74. A liability you declared in GSTR-1 is self-assessed. If you neither pay it nor explain it, the department does not need to build a case, because you already made it for them.
DRC-01C: credit claimed beyond 2B
This is the more common of the two, and the explanations are more varied. Most of them are legitimate.
Reverse charge credit. You paid RCM in cash and took the credit. That credit is properly yours and it is not in the supplier-reported part of 2B, because there is no supplier behind it. This is probably the single most frequent explanation.
Import credit. IGST on a bill of entry, where the ICEGATE flow into 2B has lagged or the period differs.
Reclaims under Rule 37 or Rule 37A. Credit previously reversed and now restored on paying the supplier or on the supplier filing his return. It is an old credit reappearing, and it will not correspond to anything in the current 2B.
Transitional and opening balance movements, and adjustments arising from the annual reworking under Rules 42 and 43.
A genuine excess claim. Credit taken on an invoice the supplier never reported, which is the case the rule is actually aimed at.
The answer in Part B is either payment through DRC-03 or an explanation with reasons. Where the difference is made up of several of the above, list them separately with amounts that add to the total. A reply that reconciles the gap line by line closes the matter. A reply that says the difference is on account of RCM and imports, without figures, invites a follow-up.
Answering well
Reconcile to the rupee before you reply. The single most useful thing in a Part B reply is that the components add up exactly to the difference the portal computed. An explanation that leaves ₹40,000 unaccounted for reads as an incomplete answer, whatever its merits.
Keep the working paper. The reply is a summary. The schedule behind it, listing the RCM entries, the bills of entry, the Rule 37A reclaims with their original reversal periods, is what you will need if anyone asks again. Save it with the reply, not separately.
Reply even when you are paying. Paying through DRC-03 without submitting Part B can leave the intimation open, and an open intimation is what triggers the filing restriction. Do both.
Do not treat a recurring intimation as normal. If DRC-01C arrives every month for the same reason, the underlying process is wrong. A business with substantial RCM will see a structural gap between 3B credit and 2B credit every single period, and the right response is to reconcile the two proactively and have the explanation ready before the intimation arrives, rather than writing the same reply twelve times a year.
Watch the clock. The period allowed is short relative to how long it takes to get an answer out of a supplier. Start on the day it arrives.
What this means for how you work
These two rules changed the economics of reconciliation. The comparison is now being performed by the portal on every registration every period, automatically. Whether you also perform it only decides whether you find out from your own working papers or from an intimation with a deadline attached.
Running the same two comparisons yourself, before filing, converts a notice into a note. Compare GSTR-1 liability against GSTR-3B liability, and GSTR-3B credit against GSTR-2B credit, every month, and keep the explanation for any structural gap on file. It takes very little time once the schedules exist, and it removes an entire category of urgent work.
The summary
DRC-01B is output tax, GSTR-1 against GSTR-3B, under Rule 88C. DRC-01C is input credit, GSTR-3B against GSTR-2B, under Rule 88D. Both are answered in Part B, both block your GSTR-1 under Rule 59(6) if ignored, and DRC-01B carries the additional exposure of direct recovery under Section 75(12). Most DRC-01C differences have honest explanations, chiefly reverse charge, imports and reclaims. Reconcile to the rupee, reply with figures rather than categories, and run both comparisons yourself before the portal does.
