Mistakes in GST returns are common — under-reporting of tax, over-claiming ITC, or receiving excess refunds. The law provides mechanisms to correct such issues without escalating into heavy litigation. Two important forms in the Demand & Recovery process are:
- DRC-03: For voluntary payment of tax, interest, and penalty.
- DRC-03A: For linking such voluntary payments to outstanding demand orders, ensuring your liability register is properly updated.
In this blog, we will cover in detail:
- What are DRC-03 and DRC-03A?
- Legal provisions and purpose
- Filing process explained step-by-step
- Examples of practical use
- Cash vs Credit ledger utilization
- Common FAQs
- Judicial perspectives and practical tips
Legal Provisions
| Form | Rule / Section | Purpose |
| DRC-03 | Rule 142(2), 142(3) | Voluntary payment of tax, interest, penalty |
| DRC-03A | GSTN Advisory | Linking voluntary payments made through DRC-03 to outstanding demand orders |
| Section 73(5) | Payment before SCN (non-fraud cases) | |
| Section 74(5) | Payment before SCN (fraud/suppression cases) | |
| Section 76 | Tax collected but not paid — recovery | |
| Rule 142(4) | Intimation of payment after demand order in DRC-07 |
What is DRC-03?
DRC-03 is the form used by taxpayers for making additional payments of tax, interest, and penalty outside normal GST returns.
It is typically filed in three scenarios:
- Before SCN – voluntary payment to avoid penalty.
- After SCN (DRC-01) – paying admitted liability.
- After final order (DRC-07) – clearing demand confirmed by officer.
Key benefit: Payment before SCN saves penalty (in Section 73 cases).
What is DRC-03A?
It is a facility on the GST portal that allows taxpayers to link voluntary or other payments made via DRC-03 to outstanding demand orders.
Why Needed?
Often, taxpayers make a payment via DRC-03 (say, ₹1,00,000), but unless that payment is specifically linked to a demand order (DRC-07, DRC-08, MOV-09, MOV-11, APL-04), the Electronic Liability Register continues to show the demand as outstanding.
Solution: File DRC-03A to adjust and map that payment against the specific order.
Who Can File DRC-03A?
- Taxpayers against whom a demand is raised in DRC-07, DRC-08, MOV-09, MOV-11, or APL-04.
- Taxpayers who have already paid via DRC-03 under “Voluntary” or “Others” category.
What It Does
- Enables full or partial adjustment of payment against demand.
- Multiple DRC-03 payments can be mapped to one demand, or one DRC-03 payment split against multiple demands (through separate filings).
- Once filed, the demand in the liability ledger reduces by the adjusted amount.
When Should You Use DRC-03?
1. Voluntary Payment Before SCN
- If taxpayer realizes mistake themselves, they can pay before SCN is issued.
- Example: A business missed paying GST on export freight services. They can calculate liability + interest and pay via DRC-03.
2. In Response to DRC-03A
- When officer issues DRC-03A intimation, taxpayer may accept liability and pay through DRC-03 to avoid penalty.
3. After Receiving SCN (DRC-01)
- Taxpayer can partly accept and pay admitted liability via DRC-03, while contesting the balance by filing reply.
4. After Final Order (DRC-07)
- Taxpayer uses DRC-03 to pay liability confirmed in the order.
Filing Process of DRC-03 on GST Portal
Step-by-step process:
- Login → GST Portal.
- Go to Services → User Services → My Applications → Intimation of Voluntary Payment – DRC-03.
- Select Cause of payment:
- Voluntary,
- Against SCN,
- Against order.
- Enter Tax Period and Sections (73, 74, 76, etc.).
- Fill in liability details (tax, interest, penalty).
- Choose payment method:
- Electronic Cash Ledger,
- Electronic Credit Ledger (except penalty).
- Submit using DSC/EVC.
- Acknowledgment is generated: DRC-04 (by officer).
Example
Case:
Company “XYZ Ltd.” availed wrong ITC of ₹2,00,000 in FY 2023-24.
- If they pay voluntarily via DRC-03 before SCN:
- Tax: ₹2,00,000
- Interest: ~₹24,000
- Penalty: Nil (Section 73 case).
- If they wait for SCN:
- Tax: ₹2,00,000
- Interest: ~₹24,000
- Penalty: ₹20,000 (10% of tax u/s 73) or ₹2,00,000 (100% of tax u/s 74, in fraud cases).
👉 Result: Paying early through DRC-03 saves penalty and litigation.
Filing DRC-03A (Linking)
- Login → GST Portal.
- Navigate to Services → Ledgers → Liability Register → Link DRC-03 to Demand (DRC-03A).
- Select the demand order reference (DRC-07 / DRC-08 / MOV / APL).
- Enter details of DRC-03 payments already made.
- Adjust fully/partially as applicable.
- Submit. Demand gets reduced in liability register.
Use of Cash Ledger vs Credit Ledger in DRC-03
| Liability | Can use Credit Ledger? | Must use Cash Ledger? |
| Tax | ✅ Yes (allowed, subject to utilization rules) | ✅ Yes (if ITC not enough) |
| Interest | ❌ No | ✅ Yes |
| Penalty | ❌ No | ✅ Yes |
| Late Fee / Other Charges | ❌ No | ✅ Yes |
Important: ITC can only be used for tax. All interest, penalty, and fee must be paid in cash.
Example Case
Case: Officer raises demand via DRC-07 for FY 2022-23:
- Tax: ₹2,00,000
- Interest: ₹25,000
- Penalty: ₹20,000
Taxpayer had already paid ₹1,00,000 via DRC-03 earlier (under “Voluntary” category).
Step 1: File DRC-03A to link that ₹1,00,000 against DRC-07 demand.
Step 2: Pay balance ₹1,45,000 (₹1,00,000 Tax + ₹25,000 Interest + ₹20,000 Penalty) via DRC-03.
Step 3: Demand is fully extinguished in liability register.
Judicial Insights
- Courts have clarified that voluntary payments via DRC-03 cannot be ignored by the department; if properly linked through DRC-03A, demand must be reduced accordingly.
- In multiple cases, payments made without proper linking continued to reflect as “outstanding” — DRC-03A is introduced to fix this administrative gap.
FAQs
Q1. Can I link multiple DRC-03 payments to one demand?
Yes, through multiple DRC-03A filings.
Q2. Can I split one DRC-03 payment across multiple demands?
Yes, you can partially allocate through separate DRC-03A filings.
Q3. What if I don’t file DRC-03A?
Your liability ledger may continue to show demand as unpaid even if you already paid via DRC-03.
Q4. Is DRC-03A mandatory?
Yes, if you want to properly adjust DRC-03 payments against demand orders.
Practical Tips
- Always file DRC-03A immediately after paying through DRC-03 if demand already exists.
- Reconcile cash/credit utilization before filing — mistakes cannot be reversed.
- Maintain acknowledgments of DRC-03, DRC-03A, DRC-04, DRC-05 for audit and litigation defense.
- Never use ITC for penalties/interest; such attempts often lead to rejection.
Conclusion
- DRC-03 is the voluntary payment form for tax, interest, and penalty.
- DRC-03A is the linkage form to adjust those payments against outstanding demands.
Together, they ensure taxpayers can settle dues quickly, avoid unnecessary penalties, and keep their liability register clean.
