DRC-01A under GST: Meaning, Procedure, Reply Format & FAQs

1. Introduction

In GST, disputes often arise during assessments, audits, or scrutiny. Before issuing a formal Show Cause Notice (SCN) in Form DRC-01, the department may first send an intimation in Form DRC-01A.
This mechanism gives the taxpayer an opportunity to pay tax voluntarily or to present their side before the SCN is issued. It reduces litigation and interest/penalty burden if handled properly.

2. Legal Background

• Relevant Sections:
  • Section 73 (Non-fraud cases: tax not paid or short paid, ITC wrongly availed, etc.)
  • Section 74 (Fraud cases: suppression, misstatement, etc.)
• Relevant Rules:

Rule 142(1A) of CGST Rules – empowers the proper officer to communicate the details of tax, interest, and penalty in Form DRC-01A.

3. What is Form DRC-01A?

• It is not a show cause notice but a pre-SCN intimation.
• Issued by the GST officer electronically on the GST portal.
• Gives taxpayer a chance to:
  1. Pay tax voluntarily and intimate in Form DRC-03, or

Submit reply/representation in Part B of DRC-01A, explaining why liability does not exist.

4. Structure of DRC-01A

• Part A – Details of tax, interest, penalty payable as per officer’s view.
• Part B – Reply by taxpayer (either payment details or explanation with documents).

5. Time Limit

• DRC-01A is generally issued before SCN in DRC-01.
• If payment is made within 30 days of DRC-01A (for Sec 73 cases) – no SCN is issued.
• In fraud cases (Sec 74) – reduced penalty benefit is available if payment is made early.

6. Benefits of Replying to DRC-01A

1. Avoids unnecessary litigation.
2. Saves penalty (up to 100% in fraud cases).
3. Builds a defense record in case matter goes to SCN stage.
4. Shows bonafide compliance approach.

7. How to Reply to DRC-01A?

(A) If liability is correct:

• Make payment using DRC-03.
• Submit details in Part B of DRC-01A with challan reference.

(B) If liability is not correct:

• Submit detailed reply in Part B.
• Attach supporting documents (invoices, reconciliations, ITC working, contracts).
• Explain legal provisions and case laws, if applicable.

8. Practical Issues in DRC-01A

• Sometimes issued without proper working or mismatch explanation.
• Taxpayers often ignore it thinking it is “optional”, but non-reply can lead to SCN with higher penalty.
• Officers may still issue SCN even after reply, but your defense is strengthened.

9. Example

Suppose during scrutiny, the officer finds a mismatch between GSTR-3B ITC claimed and GSTR-2A ITC available:

• Officer issues DRC-01A for ₹2,50,000 ITC difference.
• Taxpayer checks and finds that ₹1,50,000 is genuine ITC (supported by invoices) and only ₹1,00,000 is ineligible.
• Taxpayer pays ₹1,00,000 via DRC-03 and explains balance in Part B.
• SCN may not be issued for the paid portion, saving time and penalty.

10. Judicial Support

• Courts have appreciated the use of DRC-01A as a taxpayer-friendly step before formal litigation.
• It reduces adversarial proceedings and encourages voluntary compliance.

11. Is DRC-01A Mandatory Before Issuing DRC-01?

No, issuing DRC-01A is not mandatory.

• Legal Position:
  • Rule 142(1A) of CGST Rules says that the proper officer “may, before service of notice, communicate the details of tax, interest and penalty as ascertained by him, in Part A of Form GST DRC-01A.”
  • The word used is “may”, not “shall”. Hence, it is discretionary, not compulsory.
• Implication:
  • The officer may directly issue SCN in Form DRC-01 without issuing DRC-01A.
  • However, in practice, officers often prefer issuing DRC-01A first, because it encourages voluntary compliance and avoids litigation.
• Case References:
  • Courts have also observed that non-issuance of DRC-01A does not invalidate an SCN in DRC-01.
  • But taxpayers can argue that natural justice is better served if DRC-01A is issued before SCN.

✅ Practical Tip:

• If you receive DRC-01 directly without DRC-01A, it is not a procedural error by the department.

But if DRC-01A is issued, you should always respond, as it can reduce your penalty exposure and may close the matter without litigation.

12. Frequently Asked Questions (FAQs) on DRC-01A

1. Is DRC-01A mandatory before issuing DRC-01?

No. As per Rule 142(1A) of CGST Rules, the officer may issue DRC-01A before issuing SCN in DRC-01. The use of the word “may” makes it optional, not compulsory. If DRC-01 is issued directly, it is still valid.

2. What happens if I do not reply to DRC-01A?

If you ignore DRC-01A, the officer can proceed to issue a formal SCN in DRC-01. Not replying weakens your case and may lead to higher penalty. It is always advisable to reply or pay (if liability is genuine).

3. Can DRC-01A be challenged in appeal?

No. DRC-01A is only an intimation and not an adjudication order. Hence, it cannot be appealed. You can only reply to it or make payment in DRC-03.

4. What if I partially agree with DRC-01A?

You can pay the agreed portion through DRC-03 and give explanation for the balance in Part B of DRC-01A. The SCN, if issued later, will exclude the paid portion.

5. Is replying to DRC-01A beneficial for taxpayers?

Yes. A proper reply can help:

• Avoid penalty (if paid voluntarily within timelines).
• Reduce scope of SCN.
• Show bonafide compliance, which helps in later litigation.

6. How do I reply to DRC-01A on GST portal?

1. Log in to GST portal → Services → User Services → My Applications → Intimation of Tax Liability (DRC-01A).
2. View details in Part A.
3. Reply in Part B with either:
   • DRC-03 payment reference, or
   • Written explanation with documents.

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13. Sample Reply Format – Part B of DRC-01A

On Letterhead of the Taxpayer

To
The Proper Officer,
[Jurisdiction Name],
Goods and Services Tax Department.

Subject: Reply to Intimation in Form DRC-01A, ARN No. __________, dated __________

GSTIN: [Enter GSTIN]
Legal Name of Taxpayer: [Enter Name]

1. Reference

We acknowledge receipt of your intimation in Form DRC-01A (Part A) dated , issued under Section [73/74] of the CGST Act, 2017, alleging tax liability of ₹ (including interest/penalty).

2. Reply (Part B – Form DRC-01A)

We submit our reply as under:

(a) If Payment is Made (Fully or Partially):
We have voluntarily discharged the tax liability of ₹________ vide Form DRC-03 (ARN/Challan Ref No. ______ dated ______). Payment details are enclosed herewith.

(b) If Liability is Disputed (Fully or Partially):
We respectfully submit that the proposed demand is not tenable, based on the following grounds:

1. [State reason 1 – e.g., ITC difference is due to GSTR-2A mismatch; invoices available and valid.]
2. [State reason 2 – e.g., turnover difference due to reporting error but tax already paid.]
3. [Any legal provisions, case laws, or circulars supporting your case.]

Supporting documents (invoices, reconciliations, workings) are enclosed for verification.

3. Prayer

In light of the above, it is requested that the matter may kindly be dropped to the extent of disputed liability.

Thanking You,
Yours faithfully,

(Signature & Seal of Authorized Signatory)
Name: __________
Designation: __________
Date: __________
Place: __________

Enclosures:

1. Copy of DRC-01A (Part A)
2. Copy of DRC-03 challan (if payment made)

Supporting documents (as per reply)

14. Conclusion

DRC-01A is a golden opportunity for taxpayers to avoid SCN and penalties. Instead of ignoring it, businesses should carefully analyze the intimation, reconcile records, and reply properly. Timely action can save litigation costs and goodwill.

Tip for Taxpayers: Always maintain reconciliations of GSTR-1, GSTR-3B, GSTR-2A/2B, and books to handle such notices smoothly.