FORM DRC-01 in GST: All About the Demand and Recovery Certificate

As per the CGST Act, Demand and Recovery proceedings involve using 20 different forms for issuing notices, intimations, acknowledgements, and similar purposes. The first in the series of these forms is DRC-01. 

Do you want to know what is FORM DRC 01 in GST? This article will explain everything you need to know about the DRC-01 form, its applicability and the reply format.

What is FORM DRC-01 in GST?

DRC-01, or the Demand and Recovery Certificate, is a type of ‘show cause’ notice. Competent GST officers issue this notice when they find a mismatch in the ‘claimed’ and the ‘available’ value of input tax credits (ITC) for any GSTIN. They also issue this form when they notice that the tax is underpaid against the assessed liability.

Every Form DRC-01 contains a unique reference number for further communication and tracking. 

Purpose of FORM DRC-01

The purposes of Form DRC-01 are,

• Proving concise yet complete detail on why the tax officer is demanding tax. 
• Resolving mismatch in ITC claims and ITC available. 
• Ensuring standardised and systematic communication between GST officers and GSTIN holders.
• Minimising loss of tax revenue for the government exchequer.  

FORM DRC-01 applicability and who should file? 

So, except composition taxable GSTINs, Form DRC-01 applies to,

• Regular taxpayers 
• e-Commerce operators 
• Casual taxpayers 
• GSTIN holders who have voluntarily opted out of the GST composition scheme 

Key components and sections of FORM DRC-01 

The ‘show cause’ notice in the form of DRC-01 includes vital details on underpayment of tax, over-claim of tax credits or other improper reporting of GST transactions.  

The form is given below: 

Components and sections within a DRC-01 are: 

• Reference number— It is the specific identifier of the SCN for further correspondence and contest. 
• Receiver details— This section contains the name, GSTIN of the taxpayer who is issued the notice and address.  
• Tax period—It includes the months and financial year during which the competent officer has identified the mismatch or discrepancy. 
• The section and subsection of the concerned GST law—This field mentions the relevant provision (Sections and Subsections under the GST law) applicable to the SCN. 
• The summary— It contains a concise brief of the tax dues demanded by the tax officer, including grounds, penalties and the name of the state in which the transactions occurred.   

Circumstances requiring FORM DRC-01 filing 

Sections 73 (5) and 74 (5) of the GST Act empower GST officers to charge a taxpayer and recover excess ITC paid with interest that has been paid already. 

As per these sections, following any mismatch in ITC claim and ITC available or an excess ITC paid to a taxpayer or underpayment of GST paid by the taxpayer, a competent GST officer can declare any GSTIN holder as a GST defaulter. The GST office can also levy a penalty on underpaid GST in case of willful default and fraudulent claims. 

FORM DRC-01 time limit

Once you receive a Form DRC-01, you can settle the demand or mismatch by paying the tax and other dues mentioned in the form. Otherwise, you can reply to the SCN in the format of DRC-06. 

However, you must reply to DRC-01 within seven days from the date of receiving the notice. Otherwise, your access to filing GSTR-1 gets blocked automatically. As a result, you cannot file and report fresh GST transactions for future periods.

How to file DRC-01 Form? 

The competent GST officers file Form DRC-01. Such ‘show cause’ notice can be system-generated automatically. Officers can also file the notice manually using the GST portal.  

The steps that officers must follow are given below:

• Login to the portal with officers’ credentials. 
• Navigate to the Services tab. 
• Select ‘Return Compliance’ option under the Return tab. 

Under the Return Compliance section, you can find relevant options to file DRC-01A, DRC-01B or DRC-01C.

How to reply GST DRC-01 notice? DRC-01 reply format.  

For Form DRC-01 notice, you need to follow the DRC-06 format to reply if you have not paid the tax demanded by the authority within 30 days of receiving the notice. 

You can reply to DRC-01 through the GST portal in DRC-06 format. For that, you need to follow a few steps,

Step 1 - Click REPLY on the page showing notice details. 

Step 2 - Click Add REPLY. Select REPLY from the dropdown list. The following window opens - 

Step 3 - Write your reply precisely, expressing your reasons. 

Step 4 - Attach the necessary document in support of your reply. 

Step 5 - Preview your REPLY before clicking the FILE button.    

Step 6 - Once you click FILE, ‘Submit Application’ window will open with DSC/EVC validation options. 

For DSC, you need to browse the certificate and click the sign button. For EVC, you need to validate with an OTP.

Related Articles
FORM DRC-01A
Form DRC-01B
Form DRC-01C
DRC-03: Applicability and Procedure to Pay Additional Tax
How To Reply To A Demand Notice: DRC-06
Form DRC-07 in GST: Summary of Order