Case study: ₹40 lakh ITC mismatch and a DRC-01C intimation
A worked example of a distributor whose GSTR-3B ITC exceeded GSTR-2B, how the gap was found and how the notice was answered.
The situation
A pharma distributor in Pune claimed ₹1.80 crore ITC in its GSTR-3B for August 2026. Its GSTR-2B for August showed only ₹1.40 crore. The difference of ₹40 lakh is more than ₹25 lakh and more than 20%, so the portal issued DRC-01C (Rule 88D) and blocked filing of the next GSTR-1 until a reply was given.
Finding the gap
The accountant matched the purchase register with GSTR-2B invoice by invoice:
| Reason | ITC ₹ | Nature |
|---|---|---|
| Two suppliers filed GSTR-1 late; invoices appear in September GSTR-2B | 22,00,000 | Timing |
| One invoice booked twice | 6,00,000 | Error |
| Supplier did not file GSTR-1 at all | 12,00,000 | Not eligible yet |
| Total difference | 40,00,000 |
The reply (DRC-01C Part B, within 7 days)
- ₹22 lakh timing difference: explained with the supplier invoice list and a screenshot of September GSTR-2B showing those invoices.
- ₹6 lakh duplicate: paid through DRC-03 with interest at 18% (ITC had been used to pay tax), and quoted the DRC-03 reference.
- ₹12 lakh not in GSTR-2B: paid through DRC-03 with interest, to be reclaimed once the supplier files and the invoice appears in GSTR-2B.
The block on GSTR-1 was lifted after the reply was filed.
Interest cost
On ₹18 lakh (₹6 lakh + ₹12 lakh) used for about 40 days at 18%: roughly ₹18,00,000 × 18% × 40/365 = ₹35,500.
Lessons
- Reconcile purchases with GSTR-2B every month before filing GSTR-3B, not at year end.
- Claim ITC only for invoices shown in GSTR-2B. Hold the rest in a "pending ITC" list and claim later.
- Follow up with suppliers who file late; repeated late filers cost you interest.
- Check for duplicate supplier invoice numbers when booking bills.
Common questions
What if I do not reply to DRC-01C?
You cannot file GSTR-1 (or IFF) for the next period, and the officer may start proceedings to recover the excess ITC with interest and penalty.
Can I avoid DRC-01C by claiming less in one month?
Claim what is eligible: ITC appearing in GSTR-2B. Claiming within that limit avoids the intimation completely.