GSTR-1 vs GSTR-3B Mismatch: DRC-01B Explained
Exceed a 20% and Rs 25 lakh gap between GSTR-1 and GSTR-3B and Rule 88C triggers a DRC-01B intimation with a seven-day clock. How to reply.
GST-registered businesses must reconcile sales reported in GSTR-1 with tax paid through GSTR-3B, as a GSTR-1 GSTR-3B mismatch exceeding both prescribed thresholds can trigger an automated DRC-01B intimation. Taxpayers have seven days to pay or explain the difference; failure to respond blocks subsequent GSTR-1 filing and can disrupt customers’ input tax credit claims.
GSTR-1 reports your sales invoice by invoice. GSTR-3B is the summary return where you actually pay the tax. When the liability in GSTR-1 exceeds what you paid in GSTR-3B by more than 20% AND more than ₹25 lakh, the portal automatically issues an intimation in Form DRC-01B under Rule 88C, and you have seven days to pay or explain.
Ignore it and your next GSTR-1 is blocked. That is the part that turns a paperwork problem into a business problem, because a blocked GSTR-1 means your customers cannot claim input credit on your invoices.
The two returns, and why both exist
| GSTR-1 | GSTR-3B | |
|---|---|---|
| What it contains | Outward supplies, invoice by invoice | Consolidated summary of sales, ITC and tax payable |
| Level of detail | Invoice-wise, with customer GSTIN | Totals only |
| Frequency | Monthly, or quarterly under QRMP | Monthly |
| Do you pay tax with it | No | Yes. It cannot be filed without paying |
| Who else sees it | Your customers, via their GSTR-2B | Nobody but you and the department |
The division has a purpose. GSTR-1 is how credit flows through the chain: what you report there becomes your customer’s GSTR-2B, which is what they can claim. GSTR-3B is how money reaches the government.
That is why a late GSTR-1 hurts your customers rather than you, and a late GSTR-3B hurts you rather than them. If a buyer calls in the third week of the month asking why your invoice is not showing in their 2B, they are asking about your GSTR-1.
Rule 88C and Form DRC-01B
Rule 88C was introduced to close a specific gap: taxpayers declaring liability in GSTR-1 and paying less in GSTR-3B, with the difference going unnoticed until an audit years later.
The mechanism is automated. Rule 88C(1) provides that the intimation is issued electronically on the common portal, which means no officer is involved in generating it and no officer can issue one manually where the system has not.
The threshold, precisely
DRC-01B triggers when the difference exceeds both conditions:
- more than 20% of the liability declared in GSTR-3B, and
- more than ₹25 lakh in absolute terms.
Both must be satisfied. A small business with a 60% proportional gap on a ₹3 lakh difference will not receive DRC-01B. Neither will a large business with a ₹40 lakh gap that is only 8% of its declared liability.
This is worth understanding for the right reason. Falling below the threshold does not make a mismatch acceptable. It means the automated intimation has not fired. The liability still exists, and it can surface in a scrutiny under Section 61 or an audit later, with interest running the whole time.
What you must do within seven days
Two options, and only two:
- Pay the differential liability with interest through Form DRC-03, and report the payment in Part B of DRC-01B.
- Explain the difference in Part B, giving reasons.
Doing nothing is not an option, because the consequence is automatic.
Blocking, and why it escalates fast
Fail to respond and the portal blocks your ability to file the next GSTR-1 or IFF. Once GSTR-1 is blocked, your invoices stop appearing in customers’ GSTR-2B. They cannot claim credit, they start withholding payment, and a compliance issue becomes a working capital issue within a fortnight.
This is why DRC-01B deserves a same-day response even where the explanation is straightforward.
Reasons a mismatch is legitimate
Not every difference is underpayment. These are ordinary and defensible, provided you can evidence them:
- Credit notes. A credit note issued in a later month reduces GSTR-3B liability in that month while the original invoice sits in an earlier GSTR-1.
- Amendments. An invoice corrected through the amendment tables shifts values between periods.
- Timing under QRMP. Quarterly GSTR-1 against monthly GSTR-3B produces mismatches within a quarter that resolve at quarter end.
- Reverse charge supplies reported in GSTR-1 where the recipient pays the tax, not you.
- Advances on which tax was paid in an earlier period, with the invoice raised later.
- Data entry errors, such as an invoice reported twice in GSTR-1.
When you explain in Part B, be specific. “Timing difference” is a weak reply. “Credit note CN-114 dated 12 June for ₹28,40,000 against invoice INV-902 dated 27 April, reducing liability in the June GSTR-3B” is a complete one.
The other one: DRC-01C
Rule 88D works the same way for input tax credit. Where the ITC claimed in GSTR-3B exceeds the credit available in GSTR-2B beyond the prescribed threshold, the portal issues Form DRC-01C.
The pattern is identical: pay or explain, or subsequent filing is blocked. If you are building a compliance calendar, treat 88C and 88D as a pair. One watches your output tax, the other your input credit.
How to stop receiving these
Reconcile monthly, before filing GSTR-3B rather than after.
- Total the taxable value and tax from GSTR-1 for the period.
- Compare against the outward liability you are about to declare in GSTR-3B.
- List every difference and identify it: credit note, amendment, RCM, advance, error.
- If a line cannot be identified, do not file until it is. An unexplained difference now is a seven-day deadline later.
- Keep the reconciliation. It becomes your Part B reply and your GSTR-9C working.
Most accounting software will produce this comparison automatically. The failure is rarely the tooling, it is treating GSTR-1 and GSTR-3B as two separate chores in the same month rather than one number checked twice.
Common questions
Can I file GSTR-3B without filing GSTR-1?
Sequencing restrictions apply, and filing GSTR-3B is blocked where the corresponding GSTR-1 has not been filed. In practice, file GSTR-1 first.
What interest applies on the shortfall?
Interest under Section 50 runs from the date the tax was due until it is paid. Paying promptly on a DRC-01B limits it.
Can I get the seven days extended?
The rule prescribes seven days. Where you cannot complete the reconciliation in time, file a reply in Part B setting out what you have established and what remains, rather than letting the period lapse in silence.
Does DRC-01B mean a demand has been raised?
No. It is an intimation, an opportunity to pay or explain before proceedings begin. Ignoring it is what leads to a show cause notice.
Which return does my customer see?
GSTR-1. Their GSTR-2B is built from it. Your GSTR-3B is not visible to them.
The short version
GSTR-1 declares, GSTR-3B pays. Exceed a 20% and ₹25 lakh gap between them and DRC-01B arrives automatically with a seven-day clock, and non-response blocks your next GSTR-1, which stops your customers claiming credit. Reconcile the two before filing each month and keep the working, because that reconciliation is also your reply if an intimation ever arrives.
Frequently Asked Questions
What is a GSTR-1 GSTR-3B mismatch and when does DRC-01B get issued?
A GSTR-1 GSTR-3B mismatch arises when tax liability reported invoice-wise in GSTR-1 is higher than tax paid through GSTR-3B. The portal automatically issues Form DRC-01B under Rule 88C when the difference exceeds both 20% of GSTR-3B liability and ₹25 lakh.
How many days do I have to reply to a DRC-01B notice?
You have seven days to respond to a DRC-01B intimation on the GST portal. You must either pay the differential tax liability with interest through Form DRC-03 and report it in Part B, or explain the difference in Part B with supporting reasons.
What happens if I do not respond to Form DRC-01B?
If you do not respond to Form DRC-01B within seven days, the portal blocks your next GSTR-1 or IFF filing. Your invoices then do not appear in customers’ GSTR-2B, which can prevent their input tax credit claims and lead them to withhold payment.
Can I get DRC-01B for a small GST mismatch?
No, an automated DRC-01B is issued only when both prescribed conditions are met: the difference is more than 20% of GSTR-3B liability and exceeds ₹25 lakh. However, a mismatch below these thresholds is not acceptable by default and may arise during scrutiny or audit later.
Why is my customer unable to see my invoice in GSTR-2B?
Your customer may be unable to see an invoice in GSTR-2B because it has not been reported in your GSTR-1. GSTR-1 supplies invoice-wise sales information that flows into the buyer’s GSTR-2B, while GSTR-3B is the summary return used to pay tax.
