Complete Compliance Guide (Updated as of December 2025)

Mismatch of Input Tax Credit (ITC) between the auto-generated GSTR-2B and the self-assessed GSTR-3B continues to be a major area of GST scrutiny. Taxpayers frequently receive automated intimations or notices when ITC claimed in GSTR-3B exceeds the available credit in GSTR-2B.

Understanding the causes of mismatches and adopting proactive reconciliation and correction measures is essential to avoid interest at 18%, penalties, and potential demand orders.

This guide covers the current legal provisions, common mismatch scenarios, reconciliation steps, handling of excess claims, and best practices under the CGST Act and Rules as of December 2025.

1. What is ITC Mismatch in GSTR-2B vs GSTR-3B?

An ITC mismatch occurs when:

• ITC claimed in GSTR-3B does not align with ITC reflected in GSTR-2B.

Key Differences:

• GSTR-2B: Static, auto-generated statement based on suppliers' GSTR-1 filings (and amendments), ISD credits, and import data. It indicates available eligible ITC.
• GSTR-3B: Summary return where taxpayers self-assess and claim ITC.

As per Section 16(2)(aa) of the CGST Act (effective from January 2022), ITC is eligible only if the invoice/debit note is communicated to the recipient (i.e., reflected in GSTR-2B), subject to other conditions under Section 16.

2. Legal Basis for ITC Eligibility and Matching

• Section 16(2) CGST Act: Core conditions for ITC (possession of tax invoice, receipt of goods/services, tax paid by supplier, furnishing of return).
• Section 16(2)(aa): Additional condition – details must be furnished by supplier in GSTR-1 and communicated via GSTR-2B.
• No provisional ITC allowed beyond GSTR-2B (post amendments to Rule 36(4)).

3. Common Reasons for ITC Mismatch

Supplier-Related:

• Supplier failed to file GSTR-1 or filed late.
• Errors in GSTIN, invoice number/date, or tax amounts in supplier's GSTR-1.
• Retrospective cancellation of supplier's registration.
• Supplier non-compliance leading to Rule 37A reversal (ITC reversal if supplier fails to pay tax by 30th September following FY).

Recipient-Related:

• Claiming ITC in wrong tax period.
• Duplicate or ineligible claims (e.g., blocked under Section 17(5)).
• Clerical errors or claiming without valid invoice.

System-Related (post-IMS introduction in 2024):

• Invoices rejected/pending in Invoice Management System (IMS), affecting GSTR-2B population.

4. Types of ITC Mismatch

• Type 1: ITC claimed in GSTR-3B but not available in GSTR-2B → High-risk; triggers automated DRC-01C intimation under Rule 88D if excess exceeds threshold.
• Type 2: ITC available in GSTR-2B but not claimed in GSTR-3B → Missed eligible credit; can be claimed later (subject to Section 16(4) time limit).
• Type 3: Excess ITC claimed overall → Requires reversal + interest.

5. Step-by-Step Reconciliation Process

1. Download Data:
   • GSTR-2B (JSON/Excel/PDF) from GST portal.
   • Extract ITC details from filed GSTR-3B returns.
2. Invoice-Wise Matching:
   • Compare key fields: Supplier GSTIN, Invoice No., Date, Taxable Value, Tax Amount (IGST/CGST/SGST/Cess).
3. Classify Differences:
   • Timing differences (late supplier filing).
   • Supplier defaults (non-filing/errors).
   • Recipient errors (duplicates/ineligible).
   • IMS actions (rejected/pending invoices).
4. Monthly Monitoring:
   • Use GST portal's "Tax Liabilities and ITC Comparison" report for system-flagged mismatches.

6. Handling Excess ITC Claimed (GSTR-3B > GSTR-2B)

If significant excess detected:

• System auto-generates FORM GST DRC-01C (Part A) under Rule 88D.
• Respond within 7 days:
  • Pay excess ITC + 18% interest via DRC-03 and report in Part B.
  • Or provide explanation/reasons in Part B.
• Failure to respond satisfactorily may block GSTR-1 filing for next period and trigger demand under Section 73/74.

Reversal in GSTR-3B:

• Reclaimable reversals (e.g., timing issues): Report in Table 4(B)(2).
• Permanent/ineligible: Table 4(B)(1) or 4(D)(2).

7. Claiming Missing ITC Later

• If invoice later appears in GSTR-2B: Claim in subsequent GSTR-3B.
• Time Limit under Section 16(4): ITC for a Financial Year cannot be claimed after the earlier of:
  • 30th November of the following FY, or
  • Date of filing GSTR-9 (annual return) for that FY.

(For ongoing FY 2025-26, deadline is 30th November 2026 or GSTR-9 filing date, whichever earlier.)

8. Departmental Scrutiny and Notices

• Automated DRC-01C for significant mismatches (Rule 88D).
• Followed by DRC-01A intimation or full SCN/demand under Sections 73 (non-fraud) or 74 (fraud).
• Voluntary reversal/payment reduces penalty risk.

9. Interest and Penalty Implications

• Interest: @18% p.a. on wrongly availed and utilised excess ITC (Section 50(3); interest only if net cash outflow reduced due to wrongful utilisation – clarified via retrospective proviso and CBIC circulars).
• No interest if excess availed but not utilised (merely in credit ledger) and reversed timely.
• Penalty: Nil if voluntary correction; up to 100% equivalent if fraud alleged (Section 74).

10. Best Practices to Avoid Mismatches

• Perform monthly invoice-wise reconciliation with GSTR-2B.
• Follow up with suppliers for timely/accurate GSTR-1 filing.
• Use IMS dashboard proactively (accept/reject/pending actions).
• Maintain detailed ITC trackers and reconciliation files.
• Reverse doubtful/excess ITC immediately in next GSTR-3B.
• Respond promptly to DRC-01C intimations.
• Retain documentation for audit/defense.

Conclusion

ITC mismatches between GSTR-2B and GSTR-3B are primarily compliance issues and not necessarily indicative of tax evasion. However, ignoring them can quickly escalate into costly disputes involving 18% interest, heavy penalties, demand orders, and even blocking of GSTR-1 filings.

Proactive monthly reconciliation, timely corrections, and maintaining robust documentation are the keys to seamless GST compliance and protecting your legitimate Input Tax Credit.

If you are dealing with complex mismatches, high-value discrepancies, ongoing DRC-01C intimations, or active GST notices, professional guidance can save you significant time, money, and stress.

Book a consultation today with our experienced GST experts for a personalized review of your records and tailored solutions to resolve your ITC issues compliantly. Click here to book your consultation

Disclaimer: This guide is for general information based on CGST Act/Rules and CBIC advisories as of December 2025. GST laws are subject to change; always verify with official sources for your specific situation.