How to correct mistakes in GST by DRC-03? Its impact on GST Audit?

Arjuna (Fictional Character): Krishna, What is FORM DRC-03?

Krishna (Fictional Character): Arjuna, There are two gateways through which taxpayer can make payment of GST.

One is when the taxpayer makes payment through PMT-06 while filing monthly return GSTR-3B and when the taxpayer has made any mistake of short payment of tax or excess ITC while filing his return then, DRC-03 may be filed for correcting the mistake.

Arjuna: Krishna, what are the cases where a taxpayer can file in DRC-03?

Krishna: Arjuna, following are the cases where a taxpayer can file in DRC-03:

Under Rule 42 and 43 of the CGST Rules, Form DRC-03 can be used for reversal of ITC. As per said rules, the amount of ITC can be reversed by the registered person in FORM GSTR-3B or DRC-03

For eg. Suppose the total turnover of the Taxpayer is Rs. 10 lacs out of which Rs. 4 Lacs is Exempt and the taxpayer has claimed total ITC wrongly in 3B, then the reversal of the ITC in the ratio of turnover may be made through DRC-03.   

Additional liability of tax as per Notice issued u/s 73, 74,75 and 76, interest u/s 52 or penalty u/s 122 to 127, Show cause notice or penalty for non-compliance of E-way bill provisions can be paid through Form DRC-03.
Additional liability of tax, Reversal of ITC, interest or penalty disclosed in Annual return or Audit report can be paid through Form DRC-03.

Arjuna: Krishna, What are the details need to be given in Form DRC-03?

Krishna: Arjuna, following are the details need to be given in Form DRC-03:

Cause of Payment: It is necessary to select cause of payment from the following options:

• Voluntary
• SCN
• Annual return
• Reconciliation Statement
• Others
• Payment date will be auto-populated.

Section Number: Mention the Section under which the additional liability is to be paid through DRC-03.

Financial Year: Select the financial year for which additional liability is to be paid.

Overall tax period: Mention the correct tax period.

Act Type: The type of Act under which additional liability needs to pay such as, IGST, CGST, SGST or Cess shall be mentioned.

Place of Supply: It is compulsory to mention the place of supply after selecting the Act type as IGST.

Arjuna: Krishna, what would be the effects of DRC-03 on Electronic Cash and Credit ledger?

Krishna: Arjuna, DRC-03 is the challan which affect only Electronic Credit ledger of the taxpayer. Cash payment through DRC-03 makes Nil effect on Electronic cash ledger by debit and corresponding credit. The tax liability may be setoff through DRC-03 if credit is available in Electronic credit ledger.    

Arjuna: Krishna, What is the importance of DRC-03 for Auditor?

Krishna: Arjuna, For the Auditor, DRC-03 is the conclusive evidence to conclude the audit in case of additional tax liability or ITC reversal. There is no section to fill the information relating to DRC-03 in Form GSTR 9 and 9C. Auditor may give the details relating DRC-03 in GSTR 9C i.e Audit Report in the Notes.   

Arjuna: Krishna, what lesson should one learn from this?

Krishna: Arjuna, Form DRC-03 is similar as a coin in Sholey Movie. It is useful only to pay the liability or reversal of input tax credit. It is helpful for the government to collect the uncollected amount of revenue through DRC-03. Taxpayer may pay the additional liability through DRC-03 so that GSTR 3B for the following month won’t be disturbed. The two faces of DRC-03 coin is like Sholey movie coin i.e payment of additional liability and reversal of input tax credit. Both giving the ultimate benefit to the government. There is no separate form other than 3B to claim ITC for taxpayers if missed.