Spoke · notice response

You got a DRC-01C. Here's the 7-day playbook

The short answer

A DRC-01C is auto-issued under Rule 88D when your GSTR-3B ITC runs ahead of your GSTR-2B ITC beyond a threshold GSTN does not publish — the Rule fixes no figure and the portal limit is configurable. Within seven days, either explain the difference in Part B or pay it via DRC-03 — otherwise your next GSTR-1 / IFF is blocked.

A DRC-01C is not an assessment or a penalty — it's an automated flag that your claimed credit and your GSTR-2B don't line up. But the clock is real and the consequence of ignoring it is immediate. This is exactly what to do in the seven days, what usually causes it, and how to make it the last one you ever receive.

What triggers it

Rule 88D of the CGST Rules — inserted by Notification 38/2023-Central Tax dated 4 August 2023 — directs the system to compare the ITC you claimed in GSTR-3B (Table 4) against the ITC available in your GSTR-2B for the same period. If your claim exceeds your 2B beyond the applicable threshold, an intimation in Form DRC-01C Part A is generated automatically. No officer reviews it first; it is a rules-engine output.

Be careful with any specific trigger figure you read — including ours. Rule 88D deliberately fixes no number: it delegates to "such amount and such percentage as may be recommended by the Council". GSTN's own DRC-01C advisory goes no further, describing the trigger only as "a predefined limit" and "the configurable threshold" — which means it can be retuned without any public instrument. The one figure on the record is a recommendation of the 50th GST Council, 11 July 2023: a gap of more than 20% as well as more than ₹25 lakh — both limbs together, not "whichever is lower". Because the Rule avoids the word "prescribed", that recommendation needed no notification to take effect. Treat a widely-repeated "₹1 lakh or 20%" as unsourced: it traces to neither the Rule, the minutes, nor GSTN, and ₹25 lakh with 20% is the threshold on the sibling Rule 88C / DRC-01B liability check — the likeliest origin of the mix-up. (Position as of July 2026.)

The practical consequence: don't manage to a number. Because the operative limit is unpublished and configurable, the only reliable defence is knowing your own 2B-versus-3B gap before you file — and being able to explain it, whatever the portal's threshold happens to be that month. A reconciled gap is safe at any setting; an unexplained one is a coin-toss.

The seven-day playbook

From the date the intimation is received, you have seven days to respond in Form DRC-01C Part B. Work it in this order:

Day 1 — Reconcile the difference to the invoice

Don't reply yet. First find which invoices make up the gap. Pull your GSTR-2B for the period and your GSTR-3B ITC claim, and identify the exact lines where your claim exceeds what's in 2B. Almost every DRC-01C resolves to a specific, nameable set of invoices — a supplier who filed late, an amount you claimed in advance, a timing difference. You cannot answer Part B honestly until you know the invoices.

Day 2–3 — Classify each line: explainable or excess

Sort the gap into two buckets:

Explainable timing / benign — the credit is genuinely yours but the mismatch has a valid reason (see the causes below). These go into Part B as a reasoned explanation.
Genuine excess — you claimed credit you weren't entitled to (a duplicate, an ineligible Section 17(5) item, an amount that will never appear in 2B). This has to be paid back.

Day 4–5 — Respond in Part B, or pay via DRC-03

For the explainable portion: file Part B selecting the appropriate reason and giving a clear, invoice-level explanation of the difference.
For any genuine excess: pay the amount with interest using Form DRC-03, then record that payment in Part B. Interest runs at 18% p.a. under Section 50(3) of the CGST Act read with Rule 88B (on ITC wrongly availed and utilised, from the date of utilisation).
Most real cases are a mix — explain part, pay part. Part B accommodates both.

Day 6–7 — Confirm submission before the deadline

File Part B on the portal and keep the acknowledgement. Do not let the seventh day pass with the intimation open.

What happens if you don't respond

Silence is the expensive option:

Your next GSTR-1 / IFF is blocked. Failure to respond (or to pay) within the seven days bars you from filing your subsequent GSTR-1 / IFF under Rule 59(6) — which stalls your own customers' credit and your operations.
It escalates to a demand. The unexplained, unpaid excess is treated as ITC wrongly availed and can be pursued under the demand provisions — Section 73/74 for periods up to FY 2023-24, or the unified Section 74A for FY 2024-25 onwards — with interest, and penalty where applicable.

A DRC-01C answered on time is a non-event. A DRC-01C ignored becomes a filing block plus an adjudication.

The common (and usually benign) causes

Cause	Benign?	What to do
Supplier filed GSTR-1 late — invoice not in this month's 2B	Yes	Explain in Part B; the credit lands in a later 2B. Better: don't claim before it's in 2B
Timing — you claimed in the month of invoice, supplier reported next month	Yes	Explain the timing difference in Part B
Import IGST / ICEGATE or ISD credit reflected differently	Often	Explain the source; reconcile to the correct document (import IGST to the ICEGATE bill of entry, ISD credit to the ISD's GSTR-6)
Duplicate claim of the same invoice	No	Pay back via DRC-03 with interest
Ineligible credit claimed — Section 17(5) blocked item	No	Reverse and pay via DRC-03
Amount claimed higher than the supplier reported	No	Pay the excess; take correct credit when supplier amends

The pattern is clear: most DRC-01Cs are timing, not fraud — you claimed credit before it was communicated in your 2B. Which points straight at the fix.

What a DRC-01C is — and isn't

It helps to be precise about the instrument, because the seven-day pressure makes people over-react. A DRC-01C is an intimation of difference, generated automatically by the portal's rules engine under Rule 88D. It is not, by itself:

Not a show-cause notice. It doesn't yet allege wrongdoing or propose a penalty — that stage is a formal demand (Section 73/74 for periods up to FY 2023-24, or the unified Section 74A for FY 2024-25 onwards), which only follows if you don't respond.
Not an assessment. No officer has examined your books; the system simply compared two numbers.
Not proof you claimed wrongly. A large share of intimations are pure timing — genuine credit claimed a month before the supplier reported it.

What it is: a hard, seven-day deadline attached to a filing block. Treat the deadline seriously and the substance calmly. The right response is almost always "reconcile, explain the timing, pay only the true excess" — not panic-paying the whole difference to make it disappear, which can mean paying back credit that was legitimately yours.

How to never get another one

Rule 88D only ever compares two numbers: your 3B ITC and your 2B ITC. Keep those two in agreement before you file and the intimation can't fire. That means:

Claim from 2B, not from your books. Under Section 16(2)(aa), credit is eligible only when communicated in GSTR-2B. If it isn't in 2B this month, don't claim it this month.
Action your IMS properly. Reject duplicates and wrong-value records before they're deemed accepted into 2B, so your 2B itself is clean.
Reconcile before the 14th. Table 4 ITC is still editable — no GSTN advisory has ever announced a date for locking it, and the 17 October 2024 advisory defers it to "a later date" pending a separate advisory that has not issued. But editability is not a defence: Rule 88D compares your claim to your 2B whatever you type, so the reliable place to fix a mismatch is upstream, before the return, not after.

The catch is that keeping 3B and 2B in lockstep across hundreds of vendors, every month, is precisely the reconciliation that is painful to do manually. A single supplier who filed late, or one duplicate you didn't catch in IMS, is enough to open a gap that pulls an intimation — at whatever threshold the portal is running.

How Recoup keeps you out of Rule 88D

Recoup reconciles your Zoho Books ITC against your GSTR-2B continuously — so you always know, before you file, whether your claim will exceed your 2B and by how much. It flags the exact invoices driving any gap, names the vendor who hasn't filed, separates benign timing differences from genuine excess, and tracks the Rule 37 180-day clock so a reversal never sneaks up on you. If a DRC-01C ever does arrive, the invoice-level breakdown you need for Part B is already sitting there. The best response to a seven-day notice is never receiving one.

Stop losing seven days to a Rule 88D notice

Recoup keeps your GSTR-3B ITC and GSTR-2B in agreement before you file — and hands you the invoice-level breakdown if a DRC-01C ever lands. Names the exact vendor every time.

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