Annual Return is a form that the assessee is required to file with the department annually, but the assessee has also given chances to correct the output tax liability and input tax through the filing of form annual return GSTR-9.
Annual Return GSTR-9 is not sufficient if we have file and reverse the INPUT Tax and show additional output liability. The assessee is required to further fill DRC-03 online where the assessee is also required to verify DRC-03 through DSC or EVC code.
DRC-03 is used for both purpose either for reversing the input tax credit or payment of the additional tax as shown in the annual return, but if DRC-03 is not filled, a notice would be served by the department after verification of Annual Return.
REVERSAL OF INPUT
Reversal of INPUT mean assessee has taken excess INPUT or INPUT which is not eligible due to exempt services or goods. If assessee is taken and availed Excess INPUT or INPUT which required to be reversed. Then assesse can reverse the input with balance in credit ledger or if there is no balance in credit ledger at the time of annual return, it can be reverse through payment of Tax in cash. Assessee can also adjust the cash ledger balance to reverse the Input liability.
Additional OUTPUT TAX or liability
Additional Output liability can be of any type like less output in GSTR-1 or payment of Output Tax has been made from debiting the Credit ledger which require to reverse in the annual return. Thus payment of excess Tax can be paid in cash or through debit the cash ledger balance. As cash ledger can be used for both purpose, Credit ledger can be used both purpose also.
INTEREST/PENALTY OR OTHER CAUSES OF PAYMENT
Interest penalty is paid through challan but adjustement of the same is require to be made through GSTR-3B or DRC-03. Penalty is paid for various reason like eway bill wrong filled and caught by department. Department push assessee to pay the challan but until DRC-03 is filled, Challan payment is showing balance lying in cash ledger. Other tax other than IGST or CGST or SGST or CESS is paid through challan but it should be adjusted through DRC-03 only if it is not Interest or late fees for delay in monthly/quarterly return. Interest or Late Fees for delay in filing of Monthly/Quarterly/Annually can be adjusted through GSTR-3B or GSTR-9 automatically in case of late fees or through GSTR-3B or DRC-03 manually in case of Interest.
In Short DRC-03 is not only for payment of tax including interest penalty or other fees but it is kind of return that consume the tax or ledger balance and it is verified by assessee through DSC or EVC. It is also mandatory to file after the Annual Return if any causes arise to pay the tax. There is no Due date to file DRC-03 but assessee should file it asap to consume the ledger balance so ledger balance cannot be used for other purposes.