The CGST Act outlines numerous forms for demand and recovery processes, including notices and intimations. FORM DRC-01 initiates this series. This guide covers the DRC-01 form, its application, and how to respond.

A recent update indicates that Show Cause Notices (SCNs) under Sections 74 (for FY 2019-20) and 73 (for FY 2021-22) can be issued until September 30, 2025, potentially leading to an increase in such notices for businesses.

What is FORM DRC-01 in GST?

FORM DRC-01, also known as the Demand and Recovery Certificate, functions as a show-cause notice. GST authorities issue it when discrepancies are found between claimed and available Input Tax Credit (ITC) values for a GSTIN, or when assessed tax liabilities are underpaid. Each DRC-01 form includes a distinct reference number for tracking and future correspondence.

Purpose of FORM DRC-01

The main objectives of FORM DRC-01 include providing clear reasons for tax demands from officers, addressing ITC claim discrepancies, establishing a consistent communication method between GST authorities and taxpayers, and reducing government revenue losses.

FORM DRC-01 Applicability and Who Should File?

FORM DRC-01 is applicable to several categories of taxpayers, excluding those registered under the composition scheme. These include regular taxpayers, e-commerce operators, casual taxpayers, and individuals who have voluntarily exited the GST composition scheme.

Key Components and Sections of FORM DRC-01

The DRC-01 show-cause notice details instances of tax underpayment, excessive credit claims, or incorrect GST transaction reporting. Its key sections are:

• Reference Number: A unique identifier for the SCN, used for all subsequent communication and challenges.
• Receiver Details: Contains the taxpayer's name, GSTIN, and address.
• Tax Period: Specifies the months and financial year where discrepancies were found.
• Relevant Legal Provision: Cites the applicable sections and subsections of GST law.
• Summary: Provides a brief overview of the demanded tax, outlining the reasons, penalties, and the state where the transactions occurred.

Circumstances Requiring FORM DRC-01 Filing

FORM DRC-01 is required under specific conditions outlined in Sections 73(5) and 74(5) of the GST Act, which authorize GST officers to assess and recover excess ITC along with interest. These sections allow officers to designate a GSTIN holder as a defaulter for ITC claim mismatches, excess ITC payments, or GST underpayment. Penalties may also be imposed for intentional defaults and fraudulent claims.

FORM DRC-01 Time Limit

Upon receiving FORM DRC-01, taxpayers have the option to resolve the issue by paying the demanded tax and other amounts. Alternatively, they can submit a response using FORM DRC-06. A reply to DRC-01 must be filed within seven days of receiving the notice. Failure to do so will result in the automatic suspension of GSTR-1 filing access, preventing the reporting of new GST transactions for subsequent periods.

How to File FORM DRC-01?

FORM DRC-01 is issued by authorized GST officers, either through an automated system generation or manually via the GST portal. The process for officers involves logging into the portal, accessing the 'Services' tab, then selecting 'Return Compliance' under the 'Return' tab, where options for filing DRC-01A, DRC-01B, or DRC-01C are available.

How to Reply to a GST DRC-01 Notice?

To respond to a FORM DRC-01 notice, if the demanded tax hasn't been paid within 30 days of receipt, taxpayers must use the FORM DRC-06 format via the GST portal. The steps are:

1. On the notice details page, click "REPLY."
2. Select "Add REPLY" and then "REPLY" from the dropdown.
3. Compose a precise response detailing your reasons.
4. Attach supporting documents.
5. Preview the reply before clicking "FILE."
6. Submit the application using DSC (Digital Signature Certificate) or EVC (Electronic Verification Code) validation.