Know all about Form DRC-03: What are the steps ,Format and Prerequisites
There are times when one might discover that they have not reported their income correctly or might have missed out on something while filing GST returns. In such cases, businesses or individuals eligible for filing GST returns can use the DRC-03 form to make a voluntary tax payment as defined by GST. It is done when the government discovers a demand or deficiency of taxation after the deadline for filing tax returns for a financial year has passed. The DRC full form in GST is called the ‘Demand and Recovery Forms’.
Form DRC-03 is filed for making a voluntary payment of outstanding liabilities under Section 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.
What is SCN? A Show Cause Notice (SCN) is a formal notice issued by the tax authorities under the Goods and Services Tax (GST) in India, to a taxpayer, requiring them to explain or justify a particular action or inaction that is in violation of the GST laws.
What is form DC-03?
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 (2) covers this form. DRC-03 is also 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:
|3.||Cause of payment||<<drop down>> Audit , investigation, voluntary, SCN, others (specify)|
|4.||Section under which voluntary payment made||<<drop down>>|
|5.||Details of show cause notice, if payment is made within 30 days of its issue||Reference No.|
|7||Details of payment made including interest and penalty, if applicable- Amount in Rs|
|Sr no||Tax period||Act||Place of Supply||Tax/Cess||Interest||Penalty if available|
8) Reasons if any <<Text code>>
I hereby solemnly affirm and declare that the information given hereinabove is true and correct to the best of my knowledge and belief and nothing has been concealed there from.
Signature of the Authorized Signatory
Designation / Status_______
When should a taxpayer make payment in DRC-03?
- Audit/Reconciliation Statement: The most common reason for making payment through DRC-03 is when an auditor of GST finds out you have been underpaying your taxes, interests or penalties. A similar situation can also arise if the auditor discovers you have claimed more input in your tax credit than you were entitled to (for the year being reviewed) and the total time for declaring the mistake in the returns of GST has already passed. If either of these happens, you should make a payment voluntarily through DRC-03 Form (& report the same in GSTR-9).
- Investigation & Others: If a taxpayer is being investigated and it is found that the taxpayer has fallen behind on tax payments during the investigation, he may submit a voluntary payment in Form DRC-03.
- Annual Returns: Taxpayers typically reconcile their accounts and finances for the year before submitting their annual returns. Let’s say you find out you owe back taxes, interest, or penalties for failing to register taxable supplies correctly. In that instance, you can decide to use DRC -03 to make a voluntary tax contribution to make up for the tax difference. To make a voluntary payment of unpaid obligations under Sections 73 and 74 of the CGST Act, utilize Form DRC-03. A taxpayer can self-determine the tax before SCN issuance or within 30 days of SCN determination to avoid the difficulties of demand and recovery procedures.
Section 73 – deals with cases where there is non-payment / 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.
You can also use DRC-03 to correct errors in the computation of taxes or to pay the additional tax due to changes in your monetary circumstances:
Mismatch in GSTR-1 to GSTR-3B: 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. You can also use DRC-03 to correct errors in the computation of taxes or to pay the additional tax due to changes in your monetary circumstances.
ITC Mismatch in GSTR-2A/2B to GSTR-3B: If 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 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 utilization 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 (SCN)”.
- 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 Application’ 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 tax payer 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 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 period of 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 have 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 ‘Authorized 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 voluntary 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 case1.
DRC-03 and then follow the same steps to file the application as mentioned in Case1
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? Andenter 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 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 / Application||Electronic Cash Ledger|
|GSTR-3B (Monthly Return)||An electronic cash ledger is an e-wallet. This ledger records all payments made with cash and through banks. The ITC balance of a taxpayer may be used to pay tax Liabilities first. Liabilities that are more than the ITC must be settled in cash|
|GSTR-9 (Annually)||If any outstanding taxes are owed and are not paid when submitting GSTR-3B, they must be paid when filing GSTR-9. Payment of outstanding liabilities is made using the available balance in the electronic cash ledger. If the liabilities are greater than the cash balance that is available, a challan must be produced to make further cash payments.|
|In case of demand notices||If a demand notice is received, payment may be made using ITC and any remaining cash in the Cash Ledger. A new cash challan must be made in order to make the remaining payment in cash. Interest and penalties must be paid in full and in cash. A proper officer will issue a Form DRC-04 acknowledgment of the money made in Form DRC-03, and the officer will terminate the proceedings by issuing a Form DRC-05 order.|
Post Filing status of form DRC-03:
- The status of 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:
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.
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 the 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.