Responding to ITC Alerts : Rule 88D

According to Notification No. 38/2023- Central Tax dated 4th August 2023, the CGST Rules, 2017 were updated to include Rule 88D, accompanied by FORM GST DRC-01C. The introduction of Rule 88D, following its recommendation in the 50th Meeting of the GST Council, addresses a critical concern – the disparities that may arise between GSTR 2B and GSTR 3B.

Responding to ITC Alerts

What is Rule 88D? | Rule 88D Simplified

The newly introduced Rule 88D outlines the process for addressing differences between the input tax credit claimed in the return filed using FORM GSTR-3B and the input tax credit available in the auto-generated statement provided in FORM GSTR-2B for a given tax period. If the input tax credit claimed in GSTR-3B exceeds that available in GSTR-2B by an amount recommended by the Council, the registered person will be notified electronically and via email.

The person must then either pay the excess credit amount with interest through FORM GST DRC-03 or provide an explanation on the common portal within seven days. Upon receiving the notification, the registered person can choose to pay the excess credit amount and detail it on the common portal or provide an explanation for any remaining unpaid amount. Failure to comply may lead to the amount being demanded as per section 73 or section 74 of the regulations.

Extract of Rule 88D

The new Rule 88D reads as under “Manner of dealing with difference in input tax credit available in auto-generated statement containing the details of input tax credit and that availed in return.

(1) Where the amount of input tax credit availed by a registered person in the return for a tax period or periods furnished by him in FORM GSTR-3B exceeds the input tax credit available to such person in accordance with the auto-generated statement containing the details of input tax credit in FORM GSTR-2B in respect of the said tax period or periods, as the case may be, by such amount and such percentage, as may be recommended by the Council, the said registered person shall be intimated of such difference in Part A of FORM GST DRC01C, electronically on the common portal, and a copy of such intimation shall also be sent to his e-mail address provided at the time of registration or as amended from time to time, highlighting the said difference and directing him to—

  • pay an amount equal to the excess input tax credit availed in the said FORM GSTR-3B, along with interest payable under section 50, through FORM GST DRC-03, or
  • explain the reasons for the aforesaid difference in input tax credit on the common portal, within a period of seven days.

(2) The registered person referred to sub-rule (1) shall, upon receipt of the intimation referred to in the said sub-rule, either,

  • pay an amount equal to the excess input tax credit, as specified in Part A of FORM GST DRC01C, fully or partially, along with interest payable under section 50, through FORM GST DRC-03 and furnish the details thereof in Part B of FORM GST DRC-01C, electronically on the common portal, or
  • furnish a reply, electronically on the common portal, incorporating reasons in respect of the amount of excess input tax credit that has still remained to be paid, if any, in Part B of FORM GST DRC-01C, within the period specified in the said sub-rule.

(3) Where any amount specified in the intimation referred to in sub-rule (1) remains to be paid within the period specified in the said sub-rule and where no explanation or reason is furnished by the registered person in default or where the explanation or reason furnished by such person is not found to be acceptable by the proper officer, the said amount shall be liable to be demanded in accordance with the provisions of section 73 or section 74, as the case may be.”

Action required by taxpayer

You then have two options:

  1. Pay the excess credit amount with interest U/ s 50 through FORM GST DRC-03, or
  2. Explain the reasons for the difference on the common portal. If you receive this notification and fail to act, the outstanding amount might be demanded according to section 73 or section 74 of the rules.

Time Limit

The time limit that has been prescribed for a taxpayer to take any action is within 7 days.

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