Understanding GST Form DRC-03: Voluntary Tax Payment and Filing Process

Under GST regulations, Form DRC-03 is utilized for making voluntary tax payments, particularly when addressing demands or rectifying tax deficiencies discovered after the due date for filing a financial year's returns. This form's submission is mandated by CGST Rule 142(2) and (3). This document provides a comprehensive guide to Form DRC-03, including its purpose and the detailed procedure for filing it on the official GST portal.

Recent Legislative Developments As of June 22, 2024, the 53rd GST Council meeting proposed revisions to Rule 142 of the CGST Rules. Additionally, a circular is expected to be issued, outlining a method for offsetting payments made via Form GST DRC-03 against the pre-deposit required for filing an appeal. This modification will be implemented upon official notification by the CBIC.

What is Form DRC-03?

Form DRC-03 serves as a mechanism for taxpayers to voluntarily remit taxes, either by acknowledging an obligation independently or in response to a show-cause notice (SCN) issued by GST authorities. This form facilitates the proactive settlement of tax liabilities.

When Should a Taxpayer Make Payment in DRC-03?

Taxpayers may need to use DRC-03 in several situations:

1. Audit or Reconciliation Findings: If a GST audit identifies short payments of tax, interest, penalties, or excessive input tax credit claims for a financial year, and the reporting deadline in GST returns has passed, the taxpayer must make a voluntary payment using DRC-03 and include this in their GSTR-9.
2. Investigation Outcomes: Should an investigation reveal discrepancies or non-compliance in tax payments, the taxpayer can voluntarily settle these obligations through DRC-03.
3. Annual Return Preparation: During the year-end reconciliation before filing annual returns, any newly identified tax, interest, or penalty shortfalls due to incorrect reporting or under-reporting of taxable supplies can be paid in cash via DRC-03.
4. Responding to Demands or Show Cause Notices: Taxpayers have the option to pay demanded tax and interest using DRC-03 within 30 days of receiving a show-cause notice (SCN). This form is used for voluntary settlement of liabilities under Sections 73 and 74 of the CGST Act, helping taxpayers avoid further demand and recovery procedures. Section 73 addresses non-payment or under-payment without fraudulent intent, while Section 74 pertains to cases involving fraudulent intent.
5. GSTR-1 to GSTR-3B Liability Mismatch: Since February 2021, the GST portal allows DRC-03 for settling differences where GSTR-3B liabilities are lower than GSTR-1, often after tax authorities issue a notice. Taxpayers must make the payment or provide a justifiable response.
6. GSTR-2A/2B to GSTR-3B ITC Mismatch: Also introduced in February 2021, this option addresses excess Input Tax Credit (ITC) claims in GSTR-3B compared to GSTR-2B (beyond the 5% allowed under CGST Rule 36(4)). Taxpayers must use this form while depositing the excess claims of ITC.

It is crucial to note that while tax payments can use both electronic credit and cash ledgers, interest and penalties must be paid entirely in cash.

Prerequisites Before Filing DRC-03

Before submitting Form DRC-03, taxpayers must ensure one of two conditions: either the voluntary tax payment is made prior to the issuance of a show cause notice, or if an SCN has already been issued, the payment must occur within 30 days of its issuance date.

How to File DRC-03

To file DRC-03, follow these steps:

Step 1: Access User Services

Log in to the GST Portal and navigate to 'My Applications' within 'User Services'.

Step 2: Select Payment Scenario

Identify the specific circumstance for your payment from these three options:

• Case 1: No payment has been initiated, and no Payment Reference Number (PRN) exists.
• Case 2: A PRN was generated but remains unused, and the payment is being made within 30 minutes of its generation.
• Case 3: A PRN was generated but is unused, and more than 30 minutes have passed since its generation.

Steps to be Performed for Case 1

Here are the steps for Case 1, where no prior payment or PRN exists:

• Step (a): Initiate New Application Select 'Intimation of Voluntary Payment – DRC-03' as the Application Type, then click 'New Application.'
• Step (b): Specify Payment Type You will be presented with two choices: voluntary payment or payment against an SCN. For voluntary payments, the date automatically populates. If paying against an SCN, manually input the SCN number and its issue date, ensuring it falls within 30 days of the payment date.
• Note on Saving: An application for voluntary payment can be saved for up to 15 days. If not filed within this period, the draft will be removed. Saved applications can be accessed via Services > User Services > My Saved Applications.
• Step (c): Define Payment Period Choose the relevant section for the payment, the financial year, and then specify the 'from date' and 'to date' for the overall tax period.
• Step (d): Enter Payment Details Input the payment specifics, including any interest and penalties. Additional details can be added by clicking 'Add'. Afterward, click 'Proceed To Pay'.
• Step (e): Review Voluntary Payment Page The voluntary payment page will appear, divided into three parts:
  1. Liability Details: This table displays the outstanding liabilities.
  2. Cash Ledger Balance: Shows the current cash balance. Enter the amount to be paid from this balance against liabilities.
  3. Credit Ledger Balance: Displays available Input Tax Credit (ITC). Input the liability amount to be settled via ITC and click 'Set-Off'.
• Step (f): Confirm Payment and Generate PRN A confirmation message will appear, detailing the cash and ITC utilized. Click 'Ok' to generate a PRN and receive a successful payment notification. If a PRN is needed later, it can be retrieved from the 'Electronic Liability Register' under Services > Ledgers > Electronic Liability Register.
• Step (g): Preview Draft DRC-03 To review the draft DRC-03, click the 'Preview' button on the 'Intimation of payment made voluntarily or against SCN' page.
• Step (h): Add Reasons and Attachments Provide any reasons in the designated field. Upload necessary files in the attachments section. Check the verification box, select the 'Authorised Signatory', and enter the 'Place'.
• Step (i): Final Filing Click 'File'. You can choose either:
  • File with DSC: Browse for your digital signature certificate and click 'sign'.
  • File with EVC: An OTP will be sent to your registered mobile and email. Upon successful OTP validation, an ARN and a success message will be displayed.

Steps to be Performed for Case 2

For Case 2, where an unutilized PRN was generated within the last 30 minutes, perform these actions:

• Step (a): Navigate to Intimation Page Proceed through the steps outlined in Case 1 until you reach the 'Intimation of payment made voluntarily or against the SCN' page.
• Step (b): Input PRN Select 'Yes' when asked "Have you made payment?" and then enter the Payment Reference Number (PRN).
• Step (c): Retrieve Payment Details Click the 'Get payment details' link. The system will automatically populate the payment information based on the provided PRN.
• Step (d): Review and File Click 'Preview' to review the draft DRC-03, then follow the remaining filing steps as detailed in Case 1.

Steps to be Performed for Case 3

For Case 3, concerning an unutilized PRN generated over 30 minutes ago, follow these instructions:

• Step (a): Access Intimation Page Navigate through the initial steps described in Case 1 until you reach the 'Intimation of payment made voluntarily or against the SCN' page.
• Step (b): Enter PRN Choose 'Yes' for the "Have you made payment?" question and provide the PRN.
• Step (c): Manually Input Payment Information Click 'Get payment details'. Unlike Case 2, you will need to manually input the payment specifics because the 30-minute auto-population window has expired. The system will verify if your entered amounts correspond to the payment made; otherwise, an error will occur.
• Step (d): Complete Filing Continue with the filing process for DRC-03 as detailed in Case 1.
• Important Note: For both Case 2 and Case 3, if the entered PRN has already been used, an error message will prompt you to provide an unutilized PRN.

Where to Report Cash Payments in GST Returns?

Cash payments are recorded across different GST returns as follows:

What Happens After Filing DRC-03?

Upon successful submission of DRC-03, its status transitions to “Pending for approval by Tax officer.” The taxpayer subsequently receives an official acknowledgement, Form GST DRC-04, confirming the acceptance of the voluntary payment. Even while an acknowledgement for a previous submission is pending, taxpayers are permitted to make additional voluntary payments.