DRC-03- When should a taxpayer make a payment under DRC-03?

Introduction

The DRC-03 form is used to submit voluntary tax payments as specified by the nation’s GST law. It is done when the government discovers a tax demand or insufficiency after the deadline for filing tax returns for the fiscal year has passed. You can also fill out the DRC 03 form if you’ve already submitted a GST return but need to make changes. It may be the result of several factors, including incorrect calculation, inaccurate reporting, or underreporting of income. In this article, we will discuss the applicability, procedure to pay additional tax, Form GSTR-1 and GSTR-3B, payment under DRC-03 and the deadline for filing tax returns.

What is Form DRC-3?

The “Demand and Recovery Forms” is the full form of DRC under GST. There are situations when one may find that they have not represented their revenue correctly or that they have missed anything while filing GST taxes. The DRC-03 is a form for voluntary tax payments that enables taxpayers to pay their taxes in response to a show-cause notice (SCN) from the GST department or by voluntarily increasing their liability. Businesses or individuals who are qualified to file GST returns may use the DRC-03 form to make a voluntary contribution in such circumstances.

When should a taxpayer make a payment under DRC-03?

The following are the justifications for making a payment under DRC-03:

1. Audit/Reconciliation Statement: The taxpayer must submit a voluntary payment in DRC-03 and record it in GSTR-9 if a GST auditor finds evidence of underpayment of tax, interest, or penalties, or an excessive claim of input tax credit for the fiscal year with the audit, and the deadline for declaring it in GST returns has passed. The GST auditor must also disclose it in GSTR-9C.

2. Investigation & Others: If a taxpayer is being investigated and it is found that the taxpayer has gone failed on tax payments, he may make a voluntarily payment in DRC-03.

3. Annual Return: The taxpayer must equalize all of their accounts for the year before compiling and filing annual returns. For the first time, any short payments of taxes, interest, or fines caused by the non-reporting or under reporting of taxable supply may be detected during this reconciliation. Taxpayers can pay any tax shortfalls in cash and submit them on Form DRC-03.

4. Demand or in response to a show-cause notice: In response to a show-cause notice, the taxpayer has the option of paying the necessary tax, plus interest, using DRC-03, but only within 30 days of the date the issue mentioned in the show-cause notice. To make a voluntary payment of unpaid obligations under Sections 73 and 74 of the CGST Act, submit 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 of underpayment or nonpayment of taxes without any fraud intent.

Section 74 – deals with situations where tax fraud or tax avoidance is being done to justify underpayment or evasion.

5. Mismatched liability between GSTR-1 and GSTR-3B: The GST portal includes this option for selecting the reason for using the DRC-03 form in February 2021. If the tax authorities provide a notification for a difference, such as a tax liability gap in GSTR-3B as compared to GSTR-1, the taxpayer must cover the difference in DRC-03 or respond with a clarification.

6. ITC Mismatch – GSTR-2A/2B to GSTR-3B: The GST website included this as a choice in February 2021 for DRC-03 taxpayers who want to provide a justification for their tax payment. If there are more input tax credit (ITC) claims in GSTR-3B than in GSTR-2B (by more than the maximum allowed under CGST Rule 36(4) of 5% of ITC in GSTR-2B), the tax authorities may send a notification. This form must be used by the taxpayer to deposit excess ITC claims.

Suggested Read – Procedure to file Form DRC-03

Conclusion

Various DRC number forms are accessible for different cases under GST. In the forms, it is must that all payments must always be paid with either input tax credits or cash balances from the electronic credit or cash ledger. The ITC, however, is not applicable to interest and penalties. It must be completely covered with cash.