DRC-03: What Every Taxpayer Must Know
Under the GST regime, taxpayers must comprehend and accurately execute the DRC-03 filing procedure to manage their tax liability. The goal of this guide is to make the DRC-03 submission procedure easier to understand and follow. It provides detailed instructions to guarantee correctness and compliance in this important area of tax management. The process of complying with GST compliances can be made easier and more manageable by keeping informed and adhering to the necessary procedures as per the tax legislation. This can save time and resources. Let's examine the DRC-03 filing procedure in more detail and clear up this crucial area of tax compliance.
Table of Contents
What is Form DRC-03?
Under the GST framework, instrument DRC-03 is a crucial instrument that makes voluntary tax payments easier. When a taxpayer discovers a discrepancy in their tax payments after the deadline for filing returns, this form becomes relevant. It acts as a preventative step to address these disparities. Businesses must comprehend the DRC-03 filing process, the DRC-03 submission process, and the stages involved in filing the DRC-03 to continue in compliance and correct any unintentional errors in their GST payments.
Applicability of DRC-03
The reasons listed below can lead to payment under DRC-03:
Annual Return
Prior to preparing and submitting annual returns, the taxpayer must carry out reconciliation for the full year. Any underpayment of taxes, interest, or fines resulting from the failure to declare or underreport taxable supplies may be discovered for the first time during this reconciliation process. It is possible for taxpayers to pay these tax discrepancies in cash and to notify them by submitting a DRC-03.
Audit/Reconciliation Statement
The taxpayer is required to voluntarily pay in DRC-03 and report it in GSTR-9 if the GST auditor for the financial year under audit finds any instances of underpayment of taxes, interest, penalties, or excess input tax credit claims, and the deadline for reporting these in GST returns has passed. In GSTR-9C, the GST auditor should also report it.
Demand or in Response to Show-Cause Notice
In response to a show-cause notice, the taxpayer may choose to use DRC-03 to pay the tax sought plus interest, provided that it is done within 30 days of the date the issue specified in the notification occurred. To voluntarily pay outstanding liabilities under Sections 73 and 74 of the CGST Act, Form DRC-03 is filed. To escape the complications of demand and recovery rules, a taxpayer may self-ascertain the tax prior to the issuing of the SCN or within 30 days following the SCN finding.
Section 73 addresses situations in which taxes are not paid or are paid insufficiently without fraud being intended or called into question.
Section 74 addresses situations in which there is intentional fraud or deliberate non-payment or underpayment of taxes.
Investigation & Others
Should the taxpayer be the subject of an investigation and it turns out that the taxpayer made an improper tax payment default, he may choose to pay in DRC-03.
Liability Mismatch GSTR-1 to GSTR-3B
In February 2021, the GST portal introduced this feature for choosing the basis for utilising the DRC-03 form. If the tax authorities have given notice of differences—that is a tax liability deficit in GSTR-3B as compared to GSTR-1—the taxpayer is required to pay the difference using DRC-03 or respond with an explanation of the reasons why.
ITC Mismatch GSTR-2A/2B to GSTR-3B ITC
In February 2021, the GST portal also included this as a choice for choosing the reason for filing tax in DRC-03. The tax authorities may send a notification for excess Input Tax Credit (ITC) claims in GSTR-3B when compared to GSTR-2B (by more than allowed under CGST Rule 36(4) of 5% of ITC in GSTR-2B). This form must be used by the taxpayer when depositing their excess ITC claims.
Prerequisites and Timelines for Filing DRC-03
To make a voluntary tax payment, utilise Form DRC-03. There are two ways to make a voluntary payment:
Prior to the show-cause notice being sent
If the show cause notice has already been issued, within 30 days of the SCN being issued
The CBIC stated in the Revised Form GST DRC-03 that taxpayers must submit information about the show cause notice if payment is made within 30 days of the notice's issuance, scrutiny, tax notification obtained through Form GST DRC01A, audit, inspection, or investigation.
Steps for Filing DRC-03
Step 1: Sign in and go to the User Services page. Navigate to "My Applications" under "User Services" after logging into the GST Portal.
Step2: Select one of the three situations in which a taxpayer must make a payment:
Case 1: The taxpayer lacks a Payment Reference Number (PRN) and has not made any payments.
Case 2: Within thirty minutes after generating the PRN, a taxpayer arrives for payment even if the PRN was not used.
Case 3: After 30 minutes of generating PRN, a taxpayer comes for payment even if the PRN was not utilised.
Steps in Case 1
Step (i): Click "New Application" after choosing "Intimation of Voluntary Payment – DRC-03" as the Application Type.
Step (ii): Whether a taxpayer chooses to pay voluntarily or against SCN, they have the following two options:
Voluntary payment: There won't be a way to modify the payment date; it will be automatically entered.
Payment against SCN: The taxpayer must manually input the SCN Number and choose the date of issue, which needs to happen no later than 30 days after the payment is made.
Applications for notifications of voluntary payments may be saved for a maximum of 15 days at any point during the completion process. The saved draft will be removed from the GST database if it is not filed within 15 days.
Go to Services > User Services > My Saved Applications to see your saved application.
Step (iii): Choose the Financial Year, the Section for which the payment is being made, and the From and To dates for the entire tax period.
Step (iv): Give payment information, including interest and penalties. A taxpayer can click "Add" to submit more information. Click "Proceed To Pay" after that.
Step (v): A page requesting voluntary contribution will appear, with three sections:
Details of Liabilities: This table shows the liabilities.
Cash Ledger balance: This table shows the amount of cash on hand as of a certain date. The amount to be paid from the available balance against outstanding liabilities has to be entered by the taxpayer.
Credit Ledger balance: This table shows the ITC that was available as of the date. The taxpayer must select Set-Off after entering the amount of the liability that must be paid through ITC.
Step (vi): A confirmation message detailing the amount of cash and ITC that was used to make the payment will appear. Upon selecting "Ok," a successful payment notification and a PRN will be produced. PRN can be retrieved from the "Electronic Liability Register" under Services>Ledgers>Electronic Liability Register if it is not available.
Step (vii): Click the "Preview" button on the "Intimation of payment made voluntarily or against SCN" page to examine the draft DRC-03.
Step (viii): If you have any, please explain in the space provided. To upload, select a file from the attachments section. Enter the "Place" and choose "Authorised Signatory" after clicking the verification checkbox.
Step (ix) Select "File" by clicking. There will be two choices:
Navigate the certificate in the file with DSC and select the "sign" button.
File with EVC: The email address and registered mobile number will receive an OTP. An ARN and a success message will be sent upon OTP validation.
Steps in Case 2
Step (i): Comply with the procedures outlined in Case 1 until the taxpayer receives an acknowledgement of a payment they paid voluntarily or in opposition to the SCN page.
Step (ii): Check the box next to Have you made a payment by selecting "Yes." and input the PRN.
Step (iii): The phrase "Get payment details" will appear as a link. Details will automatically appear after the taxpayer clicks on it based on the specific payment that was made.
Step (iv) To examine the draft DRC-03, click "Preview." Then, submit the application using the same procedures as in Case 1.
Steps in Case 3
Step (i): Comply with the procedures outlined in Case 1 until the taxpayer receives an acknowledgement of a payment they paid voluntarily or in opposition to the SCN page.
Step (ii): Check the box next to Have you made a payment? and input the PRN.
Step (iii): The phrase "Get payment details" will appear as a link. As stated in Case 2, the details will not be automatically filled in when you click the link and enter them. This occurs as a result of the 30-minute time limit having elapsed. The system will verify whether the amount submitted by the taxpayer matches the payment received during the processing that takes place at the back end. In that case, the notification form will be approved. In the event if not, an error message appears.
Step (iv): From this point on, submit the application DRC-03 by using the same procedures as outlined in Case 1. In Cases 2 and 3, an error notice requesting the taxpayer to input the unutilised PRN will be presented if the PRN has already been used.
Reporting Cash Payments in GST Returns
Following the submission of the DRC-03, the payments are shown in different GST returns:
GSTR-3B: The electronic cash ledger is used to record cash and bank payments on these monthly returns. Taxpayers must make sure that all payments made through DRC-03 are appropriately reported here. This makes it easier to keep an accurate and transparent record of every transaction done throughout the month.
GSTR-9: This uses the electronic cash ledger for annual returns that can need extra tax payments. The annual tax liabilities should be reconciled by reporting the payments made through DRC-03. To make sure that all tax payments are included in the annual summary, it is crucial for taxpayers to carefully go over these entries.
Demand Notices: If demand notices are issued, taxpayers may use the Input Tax Credit (ITC) that is available, and any more amount owed must be paid in cash. Compliance depends on accurately reporting these payments in response to demand notices. This guarantees the settlement of all liabilities in accordance with the notification and the updating of the records on the GST portal.
After Filing DRC-03
Following your successful DRC-03 filing, there are a number of crucial actions you should do to guarantee that the tax-related issues are resolved:
Status Update: The form's status usually changes to "Pending for approval by Tax officer" once you submit the DRC-03. This status means that the tax authorities are reviewing your request.
GST DRC-04 Acknowledgement: A GST DRC-04 acknowledgement will be sent to you. This acknowledgement is proof that the tax authorities have received your voluntary payment or request for rectification. It recognises the beginning of the process.
Tax Officer Review: The information contained in DRC-03 will be examined by the tax officer. This assessment involves a detailed analysis of the justifications for the voluntary payment or correction, together with any other materials you may have submitted.
Additional Communication: There might be more correspondence between you and the tax authorities, contingent on the details of your submission and the tax officer's review. They might ask for more explanations or proof to back up your claims.
Order using DRC-05 form: The issuing of an order in Form DRC-05 marks the end of the procedure. This order describes the tax authorities' decision, which was based on the data and supporting documents in DRC-03 and any correspondence that followed. The order will attest to the resolution of the issue if your voluntary payment or correction is approved. Should additional measures be necessary, the directive will furnish guidelines or determinations correspondingly.
The intricacy of the case and the tax authorities' workload can affect how long this process takes. The resolution of the issue might be accelerated by prompt cooperation and discussion with the tax officer. Following receipt of the order in Form DRC-05, it is imperative that you thoroughly analyse it and follow the instructions provided to take any necessary action. This guarantees that your tax-related concerns are successfully handled and settled in accordance with GST laws.
Conclusion
Complying with the GST structure requires that you comprehend the DRC-03 filing process. With the help of this guidance, taxpayers may complete their DRC-03 submission requirements accurately and with confidence, as it offers a clear road map. Recall that the secret to hassle-free compliance in tax matters is to remain educated and proactive.
FAQ
Q1. What is voluntary payment in GST?
Under Sections 73 or 74 of the CGST Act, 2017, taxpayers have the option to voluntarily pay GST. After the Show Cause Notice (SCN) is issued, this payment must be made within 30 days. Before issuing a SCN, taxpayers may also choose to voluntarily pay GST.
Q2. When can one pay tax voluntarily under GST?
Before receiving a notification under Sections 73 or 74 of the CGST Act, 2017 or within thirty days of receiving a show cause notice (SCN) under the same sections, one may voluntarily pay taxes. Once the SCN has been issued for thirty days, voluntary payment is not permitted.
Q3. Is partial payment against a liability raised in an SCN allowed?
Partial payments against an obligation mentioned in the show-cause notice are not permitted by the taxpayer. Not even the GST interface offers the ability to make partial payments.
Q4. What is the process for filing a DRC-03?
Declaring and paying tax due voluntarily through the GST portal is part of the DRC-03 filing process. When taxpayers discover tax inconsistencies after filing their returns or in response to a show-cause notice, they utilise it. To stay compliant with GST requirements and stay out of trouble, this process is essential.
Q5. How is DRC-03 submitted?
To submit a DRC-03, you must first enter into the GST portal, choose "Intimation of Voluntary Payment – DRC-03," and then proceed with the necessary steps to declare and pay the applicable taxes. The shortened procedure guarantees user-friendliness for taxpayers, enabling them to efficiently handle their tax obligations.
Q6. What happens after the DRC-03 form is filed?
Following the filing of form DRC-03, all three ledgers—the electronic liability, cash, and credit ledgers—will be updated; that is, the corresponding debit and credit entries will be passed, and PRN will be generated.
Q7. What to do if there is no sufficient balance in the cash ledger for voluntary payment in DRC-03 against liability in an SCN?
Using the "Create Challan" option on the voluntary payment screen, deposit the money into the Electronic Cash Ledger. A screen in the Payment module will appear after pressing the "Create Challan" button. Amounts automatically appear in the challan on the Create Challan page based on the extra cash required after taking tax responsibilities and other factors into account.
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