DRC-03: Applicability and Procedure to Pay Additional Tax

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) entails filing of this form.

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

Latest updates 

22nd June 2024
In the 53rd GST Council meeting, the Council recommended an amendment in Rule 142 of the CGST Rules and issuance of a circular to prescribe a mechanism for adjustment of an amount paid in respect of the demand through Form GST DRC-03 against the amount to be paid as a pre-deposit for filing the appeal. This change will come into effect once notified by the CBIC.

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:

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

How to file DRC-03

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

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.’

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.

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.

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’.

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

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

(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.

(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.

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.

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:  

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.

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