Form DRC 03: An important tool of GST Audit

Form DRC-03:

The Form DRC-03 is the one that a taxpayer has to file when he has made mistakes related to short payments of taxes or excessive Input Tax Credit while making payments through Form PMT-06 during the filing of Form GSTR-3B for GST Return Filing.  This form is filed to correct such mistakes made by the taxpayer.

Form DRC-03 | Details to be furnished | Applicability

Cases where a taxpayer has to file Form DRC-03:

The taxpayers are required to file Form DRC-03 where there is Reversal of Input Tax Credit as per Rule 42 and Rule 43 under CGST Rules Act. The registered taxpayer can reverse the amount of  ITC through Form GSTR-3B or DRC-03 as per the laid rules.

This can be understood by taking the following instance-

Lets suppose that the total turnover of a registered taxpayer is Rs. 20 Lacs, in which Rs. 8 Lacs has been exempted. The taxapyer has wrongly claimed the total input tax credit in GSTR-3B, in such a scenario he can ask for a reversal of ITC in the ration of the turnover through the Form DRC-03.

As per the issued Notices under Section 73, Section 74, Section 75 and Section 76; Interests under Section 52 and penalties under Section 122 to Section 127, a taxapayer can pay the additional tax liabilities, show cause notice and penalties for non-compliance through this form. Also, the reversed Input Tax Credit, diclosed penalty and interest in the annual returns and audit report and levied tax implications can be paid through the same form.

Necessary details to be filed in Form DRC-03:

The following details are to be furnished by a registered taxpayer in the Form DRC-03-

  • Cause of Payment: The cause of payment is necessarily to be filed and selected in the form. One of the following options is to be selected-
  • SCN: Show Cause Notice
  • Annual Returns
  • Voluntary
  • Reconciliation Statement
  • Other auto-populated payments date
  • Overall tax period: The taxpayer is required to mention the correct and accurate tax period in the form.
  • Financial Year: The financial year has to be selected for which additional liability has to be paid.
  • Section Number: The taxpayer while making the additional liability payments through Form DRC-03, has to mention the Section that regulates the same.
  • Act Type: The Act under which the additional liability is to be paid by the taxpayer such as, CGST, SGST, UTGST, IGST or Cess must be clearly mentioned in the form.
  • Place of Supply: The taxpayer, mandatorily has to mention the details related to place of supply.

Effects of Form DRC-03 on Electronic Cash and Credit ledger:

The Form DRC-03 is a type of challan that only affects the the taxpayer’s Electronic Credit Ledger. The debit and corresponding credit in Electronic Cash Ledger is nil-affected by the any cash payments made through the Form DRC-03. In case credit is available in the electronic credit ledger, the tax liability of the payer can be set off in the said form.

Importance of Form DRC-03 for Auditors:

Form DRC-03 serves as a conclusive proof or evidence for the auditors. They can conclude the audit through this, in case additional tax liability or ITC Reversal is present. In Form GSTR-9 and Form GSTR-9C, there are no sections in which the details and information related to Form DRC-03 has to be filed in. however, the auditor may provide details regarding the same in the Audit Report Notes in Form GSTR-9C.

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    Author: Anil Agrawal
    EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or anil@ezybizindia.in.
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