Rule 88D of CGST Rules 2017 and Advisory issued by GSTN on 14th November 2023

Understanding Rule 88D of CGST Rules 2017: Managing Input Tax Credit Discrepancies

In the realm of Goods and Services Tax (GST) compliance, maintaining accuracy in input tax credit (ITC) claims is crucial for businesses. Among the various rules and provisions under the GST regime, Rule 88D of the CGST Rules 2017 holds significance in dealing with discrepancies between ITC claimed in returns (FORM GSTR-3B) and that available in the auto-generated statement (FORM GSTR-2B).

The Essence of Rule 88D:

This rule delineates the procedure to address instances where the ITC claimed by a registered person in their GSTR-3B exceeds the ITC available as per the auto-generated statement in GSTR-2B for the same tax period. In such cases, the taxpayer receives an intimation electronically on the common portal, highlighting the difference and prompting action.

Key Steps and Obligations:

1. Intimation and Directive: Upon identification of the discrepancy, the registered person is informed via Part A of FORM GST DRC-01C, sent electronically and to their registered email. They are directed to either pay the excess ITC claimed along with applicable interest via FORM GST DRC-03 or provide a valid explanation within seven days.
2. Response and Compliance: The taxpayer, upon receiving the intimation, has two options:Pay the excess ITC specified in Part A of FORM GST DRC-01C along with interest via FORM GST DRC-03 and furnish details electronically.Provide a response on the common portal explaining the remaining excess ITC, if any, that needs clarification.

Consequences of Non-Compliance:

1. Failure to pay the specified amount within the stipulated period or providing an unsatisfactory explanation may lead to demand and recovery of the amount under the provisions of section 73 or section 74.

On 14th November, GSTN has issued advisory with this regard and now taxpayers needs to take care of more compliances. Key points of advisory are

1. New Functionality: The GST portal now features a functionality that compares ITC declared in GSTR-3B with ITC available in GSTR-2B for each return period.
2. Intimation Process: If the claimed ITC in GSTR-3B exceeds the available ITC in GSTR-2B by a predefined limit or percentage difference, taxpayers will receive an intimation in the form of DRC-01C.
3. Action Required: Upon receiving the intimation, it's crucial to respond using Form DRC-01C Part B. Taxpayers can either detail the payment made to settle the difference via Form DRC-03 or provide an explanation, or even opt for a combination of both.

Consequences of Non-Compliance: Failure to file a response in Form DRC-01C Part B could impact the ability to file subsequent GSTR-1/IFF returns.

Implications and Best Practices:

1. Regularly reconcile ITC claimed in GSTR-3B with that available in GSTR-2B.
2. Regularly check your emails and GST Portal on regular basis for intimation received if any
3. Promptly respond to any intimation regarding discrepancies, ensuring timely compliance.
4. Maintain comprehensive records and explanations for ITC variations.

In case of any guidance on GST compliances, connect with us on [email protected] or 9833229199