Got a DRC-01C notice? What it means and how to reply in 7 days

2026-07-08 · 3 min read

DRC-01C is not a punishment — it's an automatic tripwire, and you have exactly 7 days to answer it with either an explanation (Part B) or a payment (DRC-03).

Few things frighten a shop owner like a notice from the GST system. Here's the good news: DRC-01C is generated by a formula, not an officer with a grudge — and a formula can be answered.

What triggers it (Rule 88D)

After you file GSTR-3B, the system compares the ITC you claimed with the ITC available in your GSTR-2B. If claimed exceeds available by more than 20% AND more than ₹25 lakh (as notified; the operative thresholds under Rule 88D), Form DRC-01C Part A lands in your portal inbox and email.

Example: your 2B shows ₹4,00,000 of credit; your 3B claims ₹5,20,000. The ₹1,20,000 gap is 30% — tripwire hit.

The 7-day fork

From the date of the intimation you have 7 days to do one (or a mix) of:

Pay the difference — Form DRC-03, with interest under Section 50 — for any portion you genuinely over-claimed.
Explain the difference — Part B of DRC-01C, selecting from the given reasons and attaching your working.

Legitimate explanations that work

Earlier months' ITC claimed now: invoices from past 2Bs you deferred (still within the 30 November limit). Attach the invoice-wise list with the 2B period each appeared in.
Import IGST: credit on imports flows from ICEGATE/Bill of Entry, not suppliers' GSTR-1 — so it's in your 3B but never in 2B.
Reverse charge (RCM): tax you paid in cash under RCM and claimed as credit.
Credit-note timing and other reconciliation differences — shown with your matching worksheet.

The common thread: invoice-level workings. "The difference is due to reconciliation" without a list convinces no one.

What happens if you ignore it

Your next GSTR-1/IFF is blocked — you can't report sales, your buyers' ITC gets stuck, and now your customers are chasing you.
The case graduates to Section 73/74 proceedings: demand, 18% interest, penalty.

Seven days is short. This is a drop-everything item.

How to never see one

DRC-01C only fires on a gap you'd already know about if you reconciled before filing. The monthly routine in our GSTR-2B reconciliation guide keeps claimed-vs-available aligned; anything you claim beyond 2B (imports, RCM) is documented as you go.

GST Sathe's notice guardian watches your claimed-vs-2B gap against the 20%/₹25 lakh line every month, before you file — and if a notice ever does arrive, it drafts the Part B reply from your reconciliation data, invoice list attached, for your CA to review. See the notice guardian →

Reply checklist (print this)

[ ] Note the intimation date — day 7 is your deadline
[ ] Pull the 3B-vs-2B working for the period
[ ] Split the gap: justifiable (list reasons + evidence) vs not
[ ] Unjustifiable portion → DRC-03 with interest
[ ] Justifiable portion → Part B with attachments
[ ] Submit within 7 days; keep the acknowledgement

Sources

Rule 88D, CGST Rules & Form DRC-01C (inserted by Notification 38/2023)
Section 50 (interest), Sections 73/74 (demands), CGST Act
GSTN advisory on DRC-01C intimations

Frequently asked questions

Is DRC-01C a demand notice? Do I have to pay immediately?+

No — it's an intimation, not a final demand. If you have a valid explanation for the gap (timing differences, RCM credits, imports), submit it in Part B within 7 days. Payment via DRC-03 is only for the portion you can't justify.

What happens if I don't reply to DRC-01C in 7 days?+

Your next GSTR-1/IFF is blocked, so you can't report sales — which then blocks your buyers' ITC. Continued silence invites proceedings under Section 73/74 with interest and penalty.

What are valid reasons for a GSTR-2B vs 3B ITC difference?+

Common legitimate reasons: ITC of earlier months claimed now (within the time limit), import IGST credit (comes from ICEGATE, not 2B), reverse-charge ITC paid in cash, and credit notes timing. Each needs documentary backing.

Can DRC-01C be issued by a human officer targeting me?+

No — it's system-generated from a rule: gap > 20% or > ₹25 lakh between 3B ITC claimed and 2B ITC available. Staying under the threshold through monthly reconciliation means it simply never fires.

GST Sathe watches notices for you

The DRC-01C 20%/₹25 lakh gap is checked every month before you file — and if a notice ever lands, the reply draft is waiting.