DRC-03: Applicability and Procedure to Pay Additional Tax

• DRC-03 is used for voluntary tax payments post-financial deadlines.
• It is crucial to rectify tax shortfalls or excess tax claims discovered during audits.
• The form helps manage taxes due for annual returns or in response to demand notices.
• Payments can be made from the electronic credit ledger or cash ledger.
• Interest and penalties must be settled in cash.

Table for all the abbreviations used in this article:

DRC-03 is a form required under GST legislation for voluntary tax payments concerning demands or tax shortfalls identified after the deadline for filing financial year returns. CGST Rule 142(2) and (3) mandates the submission of this form.The article provides comprehensive information about the DRC-03 form and the procedures to file it on the official GST portal.

22nd June 2024: During the 53rd GST Council meeting, an amendment to Rule 142 of the CGST Rules was recommended by the Council, along with the publication of a circular to establish a mechanism for adjusting payments made via Form GST DRC-03 against amounts due as pre-deposits for appeal submissions. This amendment will be enforced following the CBIC's notification. Also Read: Understand Difference Between GSTR 2A and GSTR 3B

DRC-03 is a voluntary tax payment form through which a taxpayer may settle taxes by voluntarily acknowledging liability or reacting to a show-cause notice (SCN) issued by the GST department.

Below is the Format of Form DRC-03 in GST:

The following are the reasons for making payments using DRC-03 in GST: Audit/Reconciliation Statement : After a GST audit for a financial year, if an auditor identifies any short payment of tax, interest, or penalties or an excessive claim of input tax credit, and the period for reporting these in GST returns has ended, the taxpayer should make a voluntary payment using DRC-03 and report it in GSTR-9. The GST auditor should also report it in GSTR-9C. Investigation & Others : During investigations, if it's discovered that the taxpayer made incorrect tax payments, voluntary payment can be made using DRC-03. Annual Return : Taxpayers must reconcile their annual transactions before filing annual returns. Any newly discovered discrepancies in tax payments due to non-reporting or under-reporting can be settled by making a payment in DRC-03. Demand or in Response to Show Cause Notice : Taxpayers have the option to settle the tax demanded along with interest through DRC-03, particularly in response to a show-cause notice, within 30 days from the date specified in the notice. Form DRC-03 in GST : This form is used for the voluntary payment of outstanding liabilities under Sections 73 and 74 of the CGST Act. Taxpayers can preemptively ascertain and settle tax liabilities before or within 30 days after a show-cause notice to avoid complications in demand and recovery procedures. Section 73 addresses cases involving non-payment or under-payment of tax without any intent or involvement of fraud. Section 74 addresses cases where non-payment or under-payment involves intentional fraud. Liability Mismatch – GSTR-1 to GSTR-3B : Introduced in February 2021, this option allows taxpayers to address tax authority notices regarding discrepancies between reported liabilities in GSTR-3B and GSTR-1 by making payments through DRC-03. ITC Mismatch – GSTR-2A/2B to GSTR-3B : Also introduced in February 2021, this addresses excess input tax credit claims noted by tax authorities. Taxpayers must correct these discrepancies using DRC-03. Note : Payments should be made from the input tax credit in the electronic credit ledger or the cash balance in the electronic cash ledger. Interest and penalties must be paid in cash, as ITC cannot be used for these payments. Prerequisites Before Filing DRC-03 in GST Form DRC-03 is designated for the voluntary payment of tax, which can be initiated under two conditions:Before the issuance of a show cause notice (SCN).Within 30 days following the issuance of an SCN if the notice has already been issued.

Step 1: Log in and Click on Services To file DRC-03, access the GST Portal and proceed to ‘My Applications’ under ‘User Services’. Step 2: Selecting Payment Circumstances for DRC-03 in GST Case Options for Payment under DRC-03 in GST :

• Case 1 : No previous payment was made, and no payment reference number (PRN) was available.
• Case 2 : PRN generated but unutilised, with payment attempted within 30 minutes of PRN generation.
• Case 3 : PRN generated and unutilised, with payment attempted after 30 minutes of PRN generation.

Steps for Case 1: No PRN Available Step A: Starting the Application: Select 'Intimation of Voluntary Payment – DRC-03' as the Application Type and click ‘New Application.’ Step B: Choosing Payment Type:

• Voluntary Payment : The payment date is auto-filled and cannot be edited.
• Payment against SCN : Enter the SCN Number and select the issue date, which should be within 30 days of the payment.

Note : Intimation of voluntary payment can be saved at any stage of completion for a maximum 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, Go to Services > User Services > My Saved Applications to access saved applications. Step C: Specifying Payment Details: Choose the relevant section, financial year, and the tax period (from and to dates). Step D: Entering Payment Information Fill in the details of the payment, including any interest and penalties. Add more details if necessary by clicking ‘Add’, then proceed with ‘Proceed To Pay’. Step E: Reviewing the Payment Page:

• Liability Details : Displayed in a table on this page.

• Cash Ledger Balance : This shows the available cash balance; enter the amount to be paid from this balance against the liabilities.

• Credit Ledger Balance : This shows available ITC; input how much liability will be settled using ITC and click 'Set-Off.'

Step F: Confirming the Payment: A pop-up will confirm the details of the cash and ITC used for the payment. Confirming this will generate a PRN and a success message indicating payment completion. Note : If a PRN is needed, it can be found under Services > Ledgers > Electronic Liability Register. Step G: Previewing the Form: Click the ‘Preview’ button to review the draft of the 'Intimation of payment made voluntarily or against SCN'. Step H: Final Steps Before Filing: Click the Verification checkbox and select Name Of Authorised Signatory from the drop-down list. Enter Place in the respective field. Step I: Filing the Form: Now, click on the PROCEED TO FILE button to complete the form. Once you click, a warning message will appear on the screen. Click on the SUBMIT WITH DSC or SUBMIT WITH EVC button.