Introduction
The GSTN advisory dated 14.03.2026 highlights a significant practical issue faced by assessees while filing a first appeal before the Appellate Authority under the CGST Act, 2017. The difficulty generally arises where an assessee has already made payment during investigation, scrutiny, audit, enforcement or pre-adjudication proceedings through Form GST DRC-03, but while filing appeal against the final demand order, the GST portal still requires payment of the statutory pre-deposit.
The issue, therefore, is not merely whether payment has been made, but whether such payment is properly reflected against the relevant demand entry in the Electronic Liability Register. This makes Form GST DRC-03A an important compliance mechanism in appeal matters.
We have made our sincere effort to cover all relevant situations in this article. However, if any query still remains after going through it, you may kindly feel free to contact me at the details mentioned at the end of the article.
Statutory framework governing the first appeal under section 107
The right to file first appeal is conferred by section 107(1) of the Central Goods and Services Tax Act, 2017, under which any person aggrieved by a decision or order passed by an adjudicating authority may file an appeal before the prescribed Appellate Authority within three months from the date of communication of such decision or order.
Further:
- Section 107(4) empowers the Appellate Authority to condone delay up to one additional month, provided sufficient cause is shown.
- Section 107(5) provides that the appeal shall be filed in the prescribed form and manner.
- The procedural mechanism is laid down in Rule 108 of the CGST Rules, 2017, under which the appeal is filed in Form GST APL-01.
- A provisional acknowledgement is generated at the time of filing, but the appeal is treated as properly filed only upon issuance of the final acknowledgement in Form GST APL-02.
- Where required, certified copy of the impugned order is to be submitted within the prescribed time so that the original filing date is preserved.
Thus, section 107 read with Rule 108 governs both the substantive right of appeal and the procedural mode of its exercise.
Nature and extent of mandatory pre-deposit under section 107(6)
Under section 107(6), filing of appeal is subject to fulfillment of two mandatory monetary conditions:
(i) Full payment of admitted liability
The appellant must pay in full such amount of:
- tax,
- interest,
- fine,
- fee, and
- penalty
as is admitted by him to be payable arising from the impugned order.
(ii) Statutory pre-deposit on disputed tax
In addition to the admitted amount, the appellant must pay 10% of the remaining amount of tax in dispute, subject to the statutory limit prescribed in section 107(6)(b).
Once these conditions are fulfilled, section 107(7) provides that recovery proceedings for the balance amount shall be deemed to be stayed.
Therefore, the payment under section 107(6) is not in the nature of a discretionary stay amount. It is a statutory condition precedent for maintainability of the appeal and for availing the benefit of deemed stay against recovery of the remaining demand.
The GST portal also follows this statutory architecture and auto-computes the amount required to be paid toward admitted liability and pre-deposit while filing appeal.
Why is earlier payment through DRC-03 not automatically considered for appeal
This is the central issue addressed in the GSTN advisory.
When a demand order is issued, such as in Form GST DRC-07, the system creates a corresponding Demand ID and posts the demand in Part II of the Electronic Liability Register. If the assessee thereafter uses the portal facility of “Payment towards Demand”, such payment is automatically mapped to the relevant Demand ID. Accordingly, the system can recognise that payment while computing the balance payable and the appeal pre-deposit requirement.
However, where the assessee had made payment earlier through Form GST DRC-03, such payment does not automatically get linked to the later demand order. Even though the amount may have been genuinely paid during investigation or pre-adjudication stage, the portal does not treat it as payment against the specific demand unless it is formally adjusted against that demand.
As a result, while filing appeal, the system may continue to show the demand as unpaid or partially unpaid and may again require payment of the statutory pre-deposit. This leads to an avoidable situation where the assessee appears to be asked to pay twice, although in substance payment has already been made once.
It is precisely to cure this difficulty that Form GST DRC-03A was introduced.
Legal basis of Form GST DRC-03A: Notification No. 12/2024-Central Tax dated 10.07.2024
The formal legal foundation for this adjustment mechanism lies in Notification No. 12/2024-Central Tax dated 10.07.2024, by which sub-rule (2B) was inserted in Rule 142 of the CGST Rules, 2017 and Form GST DRC-03A was introduced.
Rule 142(2B) provides that where an amount payable under section 52, section 73, section 74, section 76, section 122, section 123, section 124, section 125, section 127, section 129 or section 130 has been paid through Form GST DRC-03, but such amount has not been credited against the debit entry created for that demand in the Electronic Liability Register, the registered person may file Form GST DRC-03A electronically on the common portal.
Upon filing of DRC-03A, the amount already paid through DRC-03 is credited against the relevant demand in the Electronic Liability Register as if such payment had originally been made against that demand on the date of filing of DRC-03 itself.
This is not merely an administrative mechanism; it is a statutory legal fiction. The rule deems the earlier DRC-03 payment to have been made against the demand itself. That deeming treatment is what enables the portal to consider the payment for appeal purposes, including computation of mandatory pre-deposit.
Clarificatory effect of CBIC Circular No. 224/18/2024-GST dated 11.07.2024
The position under Rule 142(2B) was further clarified by CBIC Circular No. 224/18/2024-GST dated 11.07.2024.
The Circular explains that in many cases assessees had inadvertently deposited amounts through DRC-03 instead of making payment toward the specific outstanding demand reflected in the Electronic Liability Register. It clarifies that after filing Form GST DRC-03A, such earlier payment shall be treated as payment against the said demand from the date of original DRC-03 payment itself.
Importantly, the Circular also clarifies that once such adjustment is made, the amount may be counted toward the pre-deposit requirement for:
- first appeal under section 107, and
- tribunal appeal under section 112, wherever applicable.
Thus, the later GSTN advisory of 14.03.2026 does not introduce a new legal principle. It only operationalises and reiterates the statutory and procedural scheme already put in place in July 2024 through the above Notification and Circular.
Important restriction: DRC-03A cannot be filed after conclusion through DRC-05
A crucial proviso in Rule 142(2B) provides that where proceedings have already been concluded through Form GST DRC-05 in respect of the payment made through DRC-03, Form GST DRC-03A cannot thereafter be filed for such payment.
This restriction is significant. If the department has already treated the DRC-03 payment as culminating in closure of the proceedings through DRC-05, the law does not permit subsequent re-allocation of the same payment toward another demand by using DRC-03A.
Accordingly, before advising filing of DRC-03A, it is necessary to verify whether the earlier DRC-03 payment has or has not already culminated in issuance of DRC-05.
Correct practical remedy where DRC-03 payment has been made but not linked through DRC-03A
Where the assessee has already made payment through DRC-03 and the same has not been linked to the relevant demand while filing appeal, the correct remedy is not to pay the same amount again. The appropriate statutory course is to use Form GST DRC-03A, subject to eligibility under Rule 142(2B).
In practical terms, the assessee should first verify whether:
- the relevant demand is reflected in the portal and is eligible for adjustment,
- the earlier payment was in fact made through DRC-03,
- the demand is still outstanding, and
- the bar discussed in Section 7 does not apply.
GST portal guidance also indicates that DRC-03A can be used in respect of outstanding demand orders such as DRC-07, DRC-08, MOV-09, MOV-11 and APL-04, subject to portal functionality and conditions. It also recognises situations of:
- partial adjustment,
- one DRC-03 being adjusted against multiple demand orders, and
- multiple DRC-03 payments being adjusted against one demand order, though separate procedural steps may be required.
Step-by-step course of action for the assessee
The practical sequence should ordinarily be as follows:
Step 1: Verify the demand position
Check whether the amount already paid through DRC-03 is reflecting against the relevant Demand ID in the Electronic Liability Register (Part II).
Step 2: If not reflected, file Form GST DRC-03A
The form is generally available on the portal through:
Services → User Services → My Applications → Form GST DRC-03A
The assessee is ordinarily required to:
- enter the DRC-03 ARN,
- search and fetch the relevant payment details,
- select the appropriate Demand Order Number,
- fill the adjustment table,
- validate the set-off details,
- upload supporting documents where required, and
- file the form through DSC / EVC.
Upon successful filing, acknowledgment is generated and corresponding entries should reflect in the ledger.
Step 3: Recheck ledger and demand position
After filing DRC-03A, verify whether the adjustment is actually appearing:
- in the Electronic Liability Register, and
- in the Demand position / DRC-03 register, wherever relevant.
Step 4: File or proceed with appeal
Only after the adjustment is properly reflected should the assessee proceed to file the appeal in Form GST APL-01, so that the portal correctly recognises the earlier payment while computing pre-deposit.
Position where appeal has not yet been filed
Where APL-01 has not yet been filed, the advisable course is to first complete DRC-03A adjustment and only thereafter file the appeal, so that the statutory pre-deposit requirement under section 107(6) is correctly reflected from the outset.
Position where appeal has already been filed without linking DRC-03 through DRC-03A
(A) Where no notice has yet been issued and no appeal order has been passed
As per portal guidance, in such a case the assessee may be able to:
- withdraw the appeal,
- first file DRC-03A, and
- thereafter refile the appeal with fresh ARN.
This route is practically safer where the portal has failed to recognise the earlier payment and the appeal has not progressed further procedurally.
(B) Where notice has already been issued
If notice has already been issued in the appeal proceedings, portal FAQs indicate that withdrawal may not be available thereafter.
In such a case, the prudent course would be:
- immediately file DRC-03A, if portal functionality allows,
- preserve acknowledgment, screenshots and ledger extracts, and
- file a written submission before the Appellate Authority explaining that the earlier DRC-03 payment has now been regularised and linked under Rule 142(2B) and should be treated as valid compliance of the pre-deposit requirement to that extent.
This is especially important to prevent technical rejection or adverse inference in a case where substantive payment had already been made.
Exceptional situations and problem cases
(i) Demand order not appearing in DRC-03A dropdown
If the relevant demand order number is not appearing while attempting DRC-03A filing, one should verify whether it is a proper system-generated demand order. In certain cases, manual or improperly reflected orders may require intervention by the jurisdictional officer or nodal officer so that a proper system-generated demand reference becomes available.
(ii) DRC-05 already issued
Where proceedings in respect of the earlier DRC-03 payment have already concluded through DRC-05, the restriction discussed in Section 7 will apply.
(iii) Technical portal difficulty
Where portal error persists despite eligibility, grievance may be raised on the GST grievance mechanism, while simultaneously preserving all evidence of attempted compliance.
Practical checklist before filing DRC-03A
Before undertaking DRC-03A adjustment, the assessee or professional representative should keep ready:
1. DRC-03 ARN and date
2. Copy of the relevant demand order such as DRC-07 or other eligible order
3. Extract/screenshot of Electronic Liability Register Part II
4. Working of amount already paid and amount proposed to be adjusted against the relevant demand
5. Copy of APL-01 ARN, if appeal has already been filed
6. Status of appeal proceedings, including whether any notice has already been issued
7. Details of whether any DRC-05 has been issued in relation to the earlier DRC-03 payment
Conclusion
In professional and practical terms, the GSTN advisory dated 14.03.2026 should be treated as an important procedural warning for assessees and practitioners. The law under section 107 of the CGST Act, 2017 requires payment of admitted liability and prescribed pre-deposit before the first appeal can be effectively maintained. However, where an assessee has already deposited an amount earlier through Form GST DRC-03, such payment will not automatically be recognised for appeal purposes unless it is properly mapped to the relevant portal-generated demand.
The statutory foundation for this adjustment is found in Rule 142(2B) inserted by Notification No. 12/2024-Central Tax dated 10.07.2024, read with CBIC Circular No. 224/18/2024-GST dated 11.07.2024. Therefore, before filing or pursuing a first appeal against a demand order such as Form GST DRC-07, the assessee should verify whether the earlier DRC-03 payment is appearing against the relevant Demand ID in the Electronic Liability Register. If not, Form GST DRC-03A must be filed first, subject to the restriction discussed above.
The correct compliance sequence, in substance, is:
Earlier payment through DRC-03 → adjustment through DRC-03A → reflection against Demand ID in Electronic Liability Register → filing/refiling of appeal in APL-01
That is the proper legal and procedural route. Duplicate payment should not ordinarily be made merely because the portal has not yet recognised the earlier payment.
The author can also be reached at varunmukeshgupta96@gmail.com
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