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DRC-03: Applicability and Procedure to pay Additional Tax

Updated on:  

08 min read

DRC-03 is a form under the GST law that is required to be filed for voluntary tax payments towards demand or tax shortfall noticed later on after the time limit to file returns of a financial year expires. CGST Rule 142(2) and (3) covers this form.

The article covers all information about the DRC-03 form and steps to file the same on the government GST portal in detail.

Recent Updates on Audit under GST and DRC-03

28th May 2021
As per the 43rd GST Council meeting outcome, GSTR-9 shall continue to be optional for taxpayers with turnover up to Rs.2 crore, whereas GSTR-9C can be self-certified by taxpayers with turnover less than or equal to Rs.5 crore from FY 2020-21 onwards.

1st February 2021
Union Budget 2021:
GST audit requirement by specific professionals such as CAs and CMAs has been removed from the GST law. Section 35 and 44 were amended for this. As per the amendment, only GSTR-9-annual returns on a self-certification basis needs to be filed on the GST portal by taxpayers, completely removing the requirement for GSTR-9C -reconciliation statement.
However, the financial year and date of applicability of this removal are yet to be clarified by the government. Note that GSTR-9C submission for FY 2019-20 remains unchanged.

What is form DRC-03?

DRC-03 is a voluntary tax payment form in which a taxpayer can pay the tax by raising its liability voluntarily or in response to the show-cause notice (SCN) raised by the GST department.

Below is the format of Form DRC-03:

DRC-03

When should a taxpayer make payment in DRC-03?

The following are the causes for making payment under DRC-03:

1. Audit/Reconciliation Statement: Where the GST auditor has for the financial year under audit, discovered any case of short payment of tax, interest or penalties or excess claim of the input tax credit, and the time limit to report the same in GST returns is expired, the taxpayer must make voluntary payment in DRC-03 and report it in GSTR-9. GST Auditor should report it in GSTR-9C too.

2. Investigation & Others: If the taxpayer is subject to investigation and during such investigation, it is revealed that the taxpayer had defaulted incorrect payment of taxes, he may voluntarily make payment in DRC-03.

3. Annual Return: The taxpayer must conduct reconciliation for the entire year before proceeding to prepare and file annual returns. During such reconciliation, there can be a fresh discovery of any short payment of taxes, interest or penalties due to non-reporting or under-reporting of taxable supplies. Taxpayers are given an option to pay such tax differences in cash and report it by filing DRC-03.

4. Demand or in response to show cause notice: The taxpayer has an option to pay the tax demanded along with interest using DRC-03 in response to a show-cause notice, but within 30 days of the date of the issue mentioned in the show-cause notice.

Form DRC-03 is filed for making a voluntary payment of outstanding liabilities under Sections 73 and 74 of the CGST Act. A taxpayer can self ascertain the tax before issuance of SCN or within 30 days of SCN determination to avoid the hassles of demand and recovery provisions.

Section 73 – deals with cases where there is non-payment/under-payment of tax without any intention or invocation of fraud. 

Section 74 – deals with cases where there is non-payment/under-payment of tax with intention or invocation of fraud

5. Liability Mismatch – GSTR-1 to GSTR-3B: The GST portal added this option in February 2021 while selecting the reason for using the DRC-03 form. If the tax authorities have sent notice for differences, being shortfall of tax liability in GSTR-3B when compared to GSTR-1, then the taxpayer must make the payment in DRC-03 or reply by justifying the reasons.

6. ITC Mismatch – GSTR-2A/2B to GSTR-3B: The GST portal also added this as an option in February 2021 for selecting the reason while paying tax in DRC-03. For excess Input Tax Credit (ITC) claims (by more than allowed under the CGST Rule 36(4) of 5% of ITC in GSTR-2B) in GSTR-3B when compared to GSTR-2B, the tax authority may send the notice. The taxpayer must use this form while depositing the excess claims of ITC.

Point to note: All the payments need to be made either from input tax credit available in electronic credit ledger or cash balance available in the electronic cash ledger. But, in case of interest and penalties ITC utilisation is not available. It has to be compulsorily paid in cash.

Prerequisites before filing DRC-03

Form DRC-03 is used for making a voluntary payment of tax. Voluntary payment can be made either:

  • Before the issuance of show cause notice
  • Within 30 days of issue of SCN, in case the show cause notice is already issued

Steps to file DRC-03

Step 1: Login and navigate to User Services
Login to GST Portal and go to ‘My Applications’ under ‘User Services’.

DRC-03

Step 2: Choose either of the three circumstances under which a taxpayer makes payment:
Case 1: A taxpayer has not made any payment and does not have a Payment Reference Number (PRN).
Case 2: A taxpayer has generated PRN but is unutilized and comes for payment within 30 minutes of generation of PRN. 
Case 3: A taxpayer has generated PRN and is unutilized and the taxpayer comes for payment after 30 minutes of generation of PRN.  

Steps to be performed for Case 1

Step (a) Select the Application Type as ‘Intimation of Voluntary Payment – DRC-03’ and then click ‘New Application.’

DRC-03

Step (b) A taxpayer will get two options whether payment is made voluntary or against SCN:

1. Voluntary payment: The payment date will be auto-populated without an option to edit.
2. Payment against SCN: A taxpayer has to manually enter the SCN Number and select the issue date which must be within 30 days of making payment.

Note: Application for intimation of voluntary payment can be saved at any stage of completion for a maximum time period of 15 days. If the same is not filed within 15 days, the saved draft will be purged from the GST database.

To view your saved application, navigate to Services > User Services > My Saved Applications option.

DRC-03

Step (c) Select the Section under which payment is being made, the Financial Year and then select the from date and to date of the overall tax period.

DRC-03

Step (d) Provide details of payment including interest and penalty. A taxpayer can provide additional details by clicking on ‘Add’. Then, click ‘Proceed To Pay’.

DRC-03

Step (e) Voluntary payment page will be displayed which will be divided into 3 sections:

(1) Liability Details: Liabilities are displayed in this table.

GST payment

(2) Cash Ledger balance: The cash balance available on a particular date is reflected in this table. The taxpayer has to enter the value of cash to be paid from the available balance against outstanding liabilities.

GST payment

(3) Credit Ledger balance: ITC available as on date is reflected in this table. The taxpayer has to enter the value of the liability to be paid through ITC and click Set-Off.

Step (f) A confirmation message will pop up stating the cash and ITC balance being used up for making payment. On clicking ‘Ok’, a PRN will be generated along with a successful payment message. 

Note: If PRN is not available, it can be extracted from the ‘Electronic Liability Register’ under Services>Ledgers>Electronic Liability Register.

Step (g) To view the draft DRC-03, Click the ‘Preview’ button on the page-‘Intimation of payment made voluntarily or against SCN’.

Step (h) Provide reasons if any, in the field provided. Choose a file in the attachments section to upload. Click on the verification checkbox and then select the ‘Authorised Signatory’ and enter the ‘Place’

Step (i) Click on ‘File’. Two options will be available:

  • File with DSC: Browse the certificate and click on the button ‘sign’.
  • File with EVC: An OTP will be sent to the registered mobile number and email ID. On validation of OTP, a success message will be received along with ARN.

Steps to be performed for Case 2

Step (a) Follow the steps as mentioned in Case 1 till the taxpayer reaches on Intimation of payment made voluntarily or against the SCN page.

DRC-03

Step (b) Select ‘Yes’ for the option – Have you made payment? and enter the PRN. 

Step (c) A link, known as ‘Get payment details’ will be displayed. Once the taxpayer clicks on it, details will be auto-populated on the basis of the respective payment that was made. 

Step (d) Click on ‘Preview’ to view draft DRC-03 and then follow the same steps to file the application as mentioned in Case 1.

DRC-03

Steps to be performed for Case 3

Step (a) Follow the steps as mentioned in Case 1 till the taxpayer reaches on Intimation of payment made voluntarily or against the SCN page.

Step (b) Select Yes for the option – Have you made payment? and enter the PRN. 

Step (c) A link, known as ‘Get payment details’ will be displayed. Click on the link and enter the details, since the details will not be auto-populated as mentioned in Case 2. This happens because the time limit of 30 minutes has passed. 

Note: The processing will happen in the Back end, wherein the system will check whether the amount entered by the taxpayer matches with the payment made. If yes, the intimation form will be accepted. If no, an error message will pop up.

Step (d) Hereafter, follow the same steps as mentioned in Case 1 for filing the application DRC-03. 

Note: With respect to Case 2 and Case 3 if the PRN is already utilized, an error message will be displayed asking the taxpayer to enter the unutilized PRN.

Where to report cash payments in GST returns?

Cash Payments in various GST returns are reflected in the below manner:  

GST Return/ApplicationElectronic Cash Ledger
GSTR-3B (Monthly Return)An electronic cash ledger is an e-wallet. All payments made in cash/bank are reflected in this ledger. A taxpayer can first utilize his balance in ITC to pay tax liabilities. If the liabilities are greater than the balance in ITC, the same has to be paid in cash.
GSTR-9 (Annually)Any balance tax liability if not paid while filing GSTR-3B needs to be paid while filing GSTR-9. Available balance in electronic cash ledger is used to make payment of outstanding liabilities. In case, the liabilities are higher than the available cash balance, a challan has to be created for making additional cash payment.
In case of demand noticesIn case of demand notice, payment can be made by utilizing ITC and balance cash available in the Cash Ledger. The remaining liability needs to be paid in cash by creating an additional cash challan. Interest and Penalty need to be compulsorily paid in cash. A proper officer will issue an acknowledgement in Form DRC-04 regarding the payment made in Form DRC-03 and the proceedings will be concluded by the Officer by issuing an order in Form DRC-05.

What happens after filing DRC-03?

The status of the filing will change to “Pending for approval by Tax officer”.

The taxpayer gets an acknowledgement as issued by the tax officer in the form GST DRC-04 (Acknowledgement of Acceptance of voluntary payment).

There is no restriction on making another payment on a voluntary basis by a taxpayer, where the acknowledgement by the tax officer is still pending.

Frequently Asked Questions on DRC-03

When can one pay tax voluntarily under GST?

One can make a voluntary payment of tax before the issue of notice under Sections 73 or 74 of the CGST Act, 2017 or within thirty days of issue of show cause notice (SCN) under the said sections. One cannot make voluntary payment after thirty days of the issue of SCN.

Are there any prerequisites for making voluntary payment of tax?

The prerequisites for making voluntary payment are:
(a) Where the voluntary payment of tax is made before issue of SCN-
Show-cause notice determining the tax must not have been issued.

(b) Where the voluntary payment of tax is made after the issue of SCN or statement-
The time limit of thirty days must not have elapsed since the issue of SCN.

Is partial payment against a liability raised in an SCN allowed?

The taxpayer cannot make partial payments against a liability raised in the show-cause notice. Even the GST portal does not provide an option for making partial payments.

Can I save the application for intimation of voluntary payment?

Application for intimating voluntary payment in DRC-03 can be saved at any stage for a maximum period of fifteen days. If the same is not filed within that time, the saved draft will be removed from the GST database.
To view the saved application, go to ‘Services’ > click on ‘User Services’ > option called ‘My Saved Applications’.

What happens after the DRC-03 form is filed on the GST portal?

All three ledgers- Electronic Liability Ledger, Electronic Cash Ledger and Electronic Credit Ledger shall get updated after the filing of form DRC-03, i.e., respective debit and credit entries will be passed and PRN gets generated.

What to do if there is no sufficient balance in the cash ledger to make voluntary payment in DRC-03 against a liability raised in an SCN?

Deposit the amount in Electronic Cash Ledger by using the “Create Challan” facility available on the voluntary payment screen. Upon clicking the “Create Challan” button, one will be redirected to a screen in the Payment module.
On the Create challan page, amounts get auto-populated in the challan based on the additional cash needed after considering the tax liabilities and others.

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