Summary: The GST Demand and Recovery (DRC) forms play a critical role in communicating tax liabilities and disputes between taxpayers and the GST department. These forms also help facilitate voluntary tax payments and enable legal recovery actions. The primary forms include DRC-01, which serves as a notice for tax discrepancies, and DRC-02, issued when additional discrepancies are found. If you agree with the tax demand, you can make a payment using DRC-03, while DRC-04 confirms payment. If you disagree, DRC-06 allows you to submit a defense. DRC-07 provides the final order summarizing tax liability, while DRC-08 facilitates corrections in case of errors. If disputes remain unresolved, DRC-09 and DRC-10 can lead to recovery from third parties or the auctioning of assets. It’s crucial for taxpayers to respond promptly to notices like DRC-01 and DRC-02 to avoid penalties or asset seizures. Voluntary payments made through DRC-03 can prevent further complications, while a response to DRC-06 can help resolve disputes.
GST Demand and Recovery (DRC) forms are necessary for:
- Communicating tax liabilities and disputes between taxpayers and the GST department.
- Ensuring compliance and facilitating voluntary payments by taxpayers.
- Recovering unpaid taxes through legal proceedings if required.
This guide breaks down each GST DRC form in detail yet simply, explaining its purpose, usage, and necessary actions for taxpayers.
1. DRC-01: SCN – Official Intimation of Tax Discrepancies
Purpose:
- Issued when the tax officer finds unpaid tax, excess ITC claims, or incorrect refunds.
- It is a formal notice under Section 73 or 74 of the CGST Act.
What should you do?
If you agree to the notice, pay the tax with DRC-03 and close the case.
If you do not agree, respond with DRC-06 within 30 days along with supporting documents.
2. DRC-02: Additional Demand Statement – Additional Information Regarding Tax Discrepancies
What is it for?
- Issued after DRC-01 if the tax department discovers additional discrepancies.
- A follow-up notice that further clarifies the tax liabilities.
What should you do?
Same as DRC-01 – either pay through DRC-03 or respond through DRC-06.
3. DRC-03: Voluntary Payment Form – Clear Outstanding Liabilities Ahead of Time
Purpose:
- Through the self-assessed tax, audit findings, or settlement of disputes.
Why use DRC-03?
Close the tax demands pending without adding to any further complications.
Avoid penalty and lawsuit for settling the tax dues earlier.
4. DRC-04: Acknowledgment of Payment – Settlement Confirmation
Purpose:
- Issued when the tax department receives a voluntary payment through DRC-03.
- Proof of tax settlement.
5. DRC-05: SCN Withdrawal – Case Closure Confirmation
Purpose:
- Issued when the tax department accepts the taxpayer’s response to DRC-01.
- Confirms that no further action is required.
6. DRC-06: SCN Response – Present Your Defense
Purpose:
- Used by taxpayers to submit their reply to DRC-01 or DRC-02.
- Empowers taxpayers with the right to submit legal cases, evidence support, and documents.
How to lodge DRC-06?
Sign in to GST Portal → User Services → My Applications → Reply Submission.
Supporting documents, legal pleadings, and evidence.
A personal hearing be sought if need be.
7. DRC-07: Order Summary – Tax Liability Final Order
Purpose:
- Issued when the final order is pronounced by the tax authority after perusal of the reply submitted by the taxpayer.
- It states the tax demand, interest, and penalties at the time of finalization.
What to do?
If you accept it, pay by DRC-03.
If you do not like, appeal (DRC-08 or higher appropriate authority).
8. DRC-08: Rectification or Variation of Order – Error Rectification
Purpose:
- It is an application for rectification or variation of DRC-07 order owing to clerical or arithmetical mistakes.
- Should be submitted within 3 months of the order issue date.
9. DRC-09: Recovery Notice to Third Party – Direct Recovery from Accounts or Clients
Purpose:
- Issued after DRC-07 when the taxpayer has failed to raise the tax demand.
- The government directs third parties like banks, debtors, or customers to collect the unpaid tax from the taxpayer’s funds.
What will happen?
- The government can directly debit money from your bank account or seize payments from your clients/customers.
- A significant threat to businesses, pay off your taxes before DRC-09 is issued.
10. DRC-10: Notice for Auction of Property – Seizure & Recovery
Purpose:
- Issued when all other recovery methods fail.
- Authorizes seizure and auction of taxpayer’s assets for recovering unpaid dues.
11. DRC-11: Confirmation of Auction Sale – Finalization of Asset Disposal
Purpose:
- Confirms that the taxpayer’s confiscated property has been sold through an auction
- Gives detailed information regarding the auction process along with the amount recovered.
12. DRC-12: Possession Order – Physical Takeover of Assets
Purpose:
- Issued when the tax department takes physical possession of the taxpayer’s property for auction.
- Used in extreme cases where taxpayers refuse to comply
Important Notes for Taxpayers
Never ignore DRC-01 or DRC-02 notices; respond within the deadline to avoid penalties.
If you notice a tax payment shortfall, use DRC-03 to settle voluntarily and avoid legal actions.
If the tax department’s order seems unfair, respond through DRC-06 or file an appeal.
Ensure payments are made on time to avoid DRC-09 recovery actions or property seizure (DRC-10, DRC-12).
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