DRC-03: Applicability and Procedure to Pay Additional Tax

What is Form DRC-03?

DRC-03 in GST is a tax payment form that taxpayers can use to pay taxes voluntarily. The taxpayer can either pay the tax voluntarily by raising its tax liability or in response to a show cause notice issued by the GST department. This form is helpful when the taxpayer identifies a shortfall in tax payments after the due date for filing returns. It serves as a proactive approach to rectifying such mistakes.

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When is Form DRC-03 Applicable in GST?

Taxpayers should make payment using the DRC-03 form in GST in the following conditions -

• Audit/Reconciliation Statement- Where the GST auditor has identified a case of shortfall of tax payment during the year, interest, penalties, or excess claim of the input tax credit. If the time limit to report such income in GST returns has expired, then the taxpayer must voluntarily make payment in form DRC-03 in GST and report it in GSTR-9.
• Investigation and Others - If the taxpayer is under investigation by the GST department and it is found that he has defaulted in tax payment, then he can voluntarily make payment using form DRC-03.
• Annual Returns - The taxpayer has to reconcile his books of accounts for the year before filing annual returns. If any short payment of taxes, interest, or penalties were found due to under-reporting or non-reporting of taxable supplies. Taxpayers can also pay these taxes with cash or by reporting it in Form DRC-03.
• Demand or in Response to Show Cause Notice - The taxpayer can pay the tax demand along with the interest using the DRC-03 form in response to the show cause notice issued by the GST department. This form has to be issued within 30 days of the date of issue mentioned in the show-cause notice.
  

  Section 73
  Section 73 addresses cases of non-payment or underpayment of tax without the intent of fraud or willful misrepresentation.

  Section 74
  Section 73 covers cases of non-payment or underpayment of tax involving intent or the invocation of fraud.

• Liability Mismatch - GSTR-1 to GSTR-3B - In February 2021, the GST portal introduced this option when selecting the reason for using the DRC-03 form. If tax authorities issue a notice regarding a tax shortfall in GSTR-3B compared to GSTR-1, the taxpayer must either make the payment through DRC-03 or provide a response explaining the discrepancy.
• ITC Mismatch - GSTR-2A/2B to GSTR-3B - In February 2021, the GST portal introduced this option for selecting the reason when paying tax through DRC-03. If a taxpayer claims excess Input Tax Credit (ITC) in GSTR-3B, exceeding the 5% limit allowed under CGST Rule 36(4) compared to GSTR-2B, the tax authorities may issue a notice. The taxpayer must use the DRC-03 form to pay the excess ITC claims.

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Things to Keep in Mind Before Filing DRC-03

The DRC-03 form in GST, which can be used to make payment of taxes voluntarily or involuntarily, can be used in the following situations -

• Anytime before a show cause notice is issued.
• Within 30 days of issuing the show cause notice if the show cause notice has already been issued.

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How to File the DRC-03 Form?

step-by-step guide to making a payment through DRC-03 on the GST portal:

Step 1: Log in and Access User Services

Log in to the GST portal and go to ‘My Applications’ under ‘User Services.’

Step 2: Select Payment Circumstance

Choose one of the following cases based on your situation:

• Case 1: No payment made, and no Payment Reference Number (PRN) generated.
• Case 2: PRN generated but unused, with payment initiated within 30 minutes of PRN generation.
• Case 3: PRN generated but unused, with payment initiated after 30 minutes of PRN generation.

Steps for Case 1:

Step (a): Select Application Type

• Choose ‘Intimation of Voluntary Payment – DRC-03’ as the application type, then click ‘New Application.’

Step (b): Choose Payment Type

You’ll have two options:

• Voluntary Payment: The payment date will be automatically filled in (not editable).
• Payment Against SCN: Enter the SCN number manually and choose the issue date, which must be within 30 days of payment.

Note: You can save your application at any stage for up to 15 days. If not filed within 15 days, it will be deleted from the GST database. To view saved applications, go to Services > User Services > My Saved Applications.

Step (c): Fill in Payment Details

• Select the Section under which payment is being made, choose the Financial Year, and specify the start and end dates for the tax period.

Step (d): Enter Payment Details

• Provide the details of the payment, including interest and penalties.
• To add more details, click ‘Add’ and then select ‘Proceed to Pay.’

Step (e): Review Voluntary Payment Page

The page is divided into three sections:

1. Liability Details: Displays the tax liabilities.
   
   
2. Cash Ledger Balance: Shows the available balance in your cash ledger.
   
   
3. Credit Ledger Balance: Reflects available Input Tax Credit (ITC). Enter the liability amount to be paid using ITC, then click ‘Set-Off.’

Step (f): Confirm Payment

• A confirmation message will appear, showing the cash and ITC balance being used for the payment.
• Click ‘Ok’ to generate a Payment Reference Number (PRN) and receive a successful payment message.

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

Step (g): Preview the Draft DRC-03

• To view your draft DRC-03 form, click the ‘Preview’ button on the ‘Intimation of payment made voluntarily or against SCN’ page.

Step (h): Add Reasons and Attach Files

• Provide any necessary reasons in the designated field.
• Attach supporting documents by uploading a file in the attachments section.
• Check the verification box, select the ‘Authorised Signatory,’ and enter the location.

Step (i): File the Form

Two options are available for filing:

• File with DSC: Browse your digital signature certificate and click ‘Sign.’
• File with EVC: An OTP will be sent to your registered mobile number and email ID. Enter the OTP, and upon validation, a success message will appear along with the ARN.

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How to Report Cash Transactions in GSTR?

Cash transactions in various GST returns must be reported in the following manner -

1. GSTR-3B (Monthly Return):
   
   • The Electronic Cash Ledger acts as an e-wallet where all payments made in cash or through a bank are recorded.
   • Taxpayers must first use their ITC balance to settle tax liabilities. If the liabilities exceed the available ITC, the remaining amount must be paid in cash.
2. GSTR-9 (Annual Return):
   
   • Any unpaid tax liability from GSTR-3B needs to be settled while filing GSTR-9.
   • Payments are made using the available balance in the Electronic Cash Ledger. If the liability exceeds the available cash balance, a challan must be created to pay the additional amount in cash.
3. In Case of Demand Notices:
   
   • Payments can be made using both ITC and the available cash balance in the Cash Ledger. If there is still a liability, an additional cash challan must be created.
   • Interest and penalties must always be paid in cash.
   • After payment is made through DRC-03, the proper officer will issue an acknowledgment in Form DRC-04 and conclude the proceedings by issuing an order in Form DRC-05.

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What Happens After Filing Form DRC-03 in GST?

After filing Form DRC-03, the status of the filing changes to “Pending for Approval by Tax officer.”

The tax officer issues an acknowledgment to the taxpayer in Form DRC-04. This acknowledgment acts as a confirmation of acceptance of voluntary payment.

Once you have made the payment and filed Form DRC-03, you can also make another payment on a voluntary basis, even if the acknowledgment is pending with the tax officer.

You should keep in mind that you can file multiple DRC-03 forms even while waiting for acknowledgment from the tax officer. Filing your GST return is not just a tax obligation but also an integral contribution to the nation, making it essential to choose the right expert for the job. By hiring a tax professional from Tax2win, you can ensure that your deadlines are met and that you avoid any mistakes or missed deadlines. Book an expert now!

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