ITC Mismatch between GSTR-2B vs GSTR-3B: New Rule 88D everything you need to know

ITC mismatch

Rule 88D of CGST Rules, 2017: The Central Board of Indirect Taxes and Custom(CBIC) has notified New Rule 88D regarding Manner of dealing with difference in ITC available in auto-generated statement containing the details of input tax credit and that availed in return via issuing Notification.

CGST Rule 88D tells how the registered person must deal with the difference of amount in the actual ITC claimed, which is exceeding the Input Tax Credit amount generated in the registered person’s GSTR-2B. Here the taxpayer will be intimated by the authorities about the difference in ineligible Input Tax Credit amount in Part A of FORM GST DRC-01C. The intimation will be available to him on the common GST portal and will be sent to him on the registered email address, highlighting the difference.

So, a taxpayer claims Input Tax Credit based on the reconciliation of the GSTR-2B and GSTR-3B. While the GSTR-3B is a self-furnished return statement by the registered person where they claim the ITC amount as per his books of accounts of outward supplies. On the other hand, GSTR-2B is an auto-generated statement that contains the details of the books of accounts of the buyer’s end.

For a supplier/ registered person to claim ITC, they must provide the reconciliation of his GSTR-3B, and the auto-generated GSTR-2B for a tax period or periods as per the law.

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Reasons For Mismatches Between GSTR-2B And GSTR-3B

  • Excess ITC reversal in the previous tax periods reclaimed in the current tax period.
  • Recrediting ITC upon making payment to supplier towards the invoice, where such ITC was reversed under the CGST Rule 37 in the earlier tax period.
  • Recrediting ITC upon filing GSTR-1 by the supplier, where such ITC was reversed under CGST Rule 37A in the earlier tax period.
  • The taxpayer files GSTR-3B with incorrect details and amends details in the next tax period (for typographical errors, wrong tax rates, etc.).
  • The supplier has wrongly furnished the figures (clerical error or GST rate error) and accordingly reflected in GSTR-2B.
  • The supplier has wrongly reflected the transactions i.e., instead of business to business (B2B) the transaction is reflected as business to customer (B2C) and accordingly does not reflect in GSTR-2B.
  • The supplier has wrongly furnished inter-state transactions as intra-state or vice versa, etc and has accordingly incorrectly reflected in GSTR-2B.
  • Input tax credit not claimed in previous tax period/s for not receiving purchased goods or services in that tax period. It could also include cases of receipt of goods in instalments.
  • Missed claiming input tax credit in the previous tax period/s.
  • Input tax credit on import of goods, that do not appear in GSTR-2B.
  • ITC claimed on inward supplies from SEZ, which do not appear in GSTR-2B.
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Rule 88D’s Implementation Timeline

The GST Council, in its 50th meeting on 11th July 2023, birthed the idea of Rule 88D. Following its conceptualization, a formal announcement was made on 4th August 2023 through CGST notification 38/2023. This rule was subsequently enforced from this date.

Crux of Rule 88D

CGST Rule 88D is designed as a mechanism to systematize the notification process for cases with glaring discrepancies. When the ITC claimed in GSTR-3B exceeds the available ITC in GSTR-2B by a specified margin, an automated intimation is dispatched to the taxpayer. This is executed through the DRC-01C form, which taxpayers will receive on their registered GST portal email. Upon receiving this intimation, taxpayers must, within a week:

  • Provide justification for the inflated ITC claim
  • Furnish supporting documents, if any Or
  • settle the excess ITC amount
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Consequences of not Complying with Rule 88D

Suppose the taxpayer who received intimation in DRC-01C but has not responded, he could be blocked from filing next period’s GSTR-1 and/or IFF (Invoice Furnishing Facility) as laid down by CGST Rule 59(6). Moreover, the notified CGST Rule 88D further states that the excess ITC claimed shall attract demand and recovery provisions of Sections 73 or 74 of the CGST Act, in short a demand notice and adjudication.

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