Issue when using linked Gitlab Community Edition VCS in Terraform Cloud


We are facing a following issue when trying to create a workspace based on VCS.
APP versions:
Terraform Cloud Free
Gitlab CE v16.x

Gitlab EE is exposed to the internet and the integration is all-green:

When creating a workspace I can see the projects listed:

However, when I try to create a workspace, following error occurs:


The gitlab user is an admin, as outlined in GitLab EE and CE - VCS Providers - Terraform Cloud | Terraform | HashiCorp Developer .

Has anyone else ran into this problem and knows how to solve it?