DRC-03 voluntary payment under Section 73(5) of the CGST Act allows a GST-registered taxpayer to proactively pay any tax shortfall, interest, or erroneously claimed Input Tax Credit before the department issues a Show Cause Notice (SCN). By filing DRC-03 in time, you pay only the tax and interest — no penalty applies. This option is available to all GST-registered businesses facing demand situations under Section 73.

• No penalty if payment is made before SCN under Section 73(1)
• Interest under Section 50 of CGST Act still applies on the shortfall
• The form must be filed on the GST portal before the officer issues the SCN

What is Form DRC-03?

Form DRC-03 is the prescribed GST form used by taxpayers to make a voluntary payment of tax, interest, or penalty that is outstanding or disputed. It is governed by Rule 142(2) and Rule 142(3) of the CGST Rules, 2017, read with Section 73(5) of the CGST Act. Filing DRC-03 is essentially an acknowledgement that a liability exists and the taxpayer is settling it voluntarily, without waiting for the department to enforce it.

This form can be used in multiple situations — during an audit, inspection, investigation, or even suo motu by the taxpayer on self-identification of a tax shortfall. As of July 2026, it remains one of the most effective tools to avoid penal consequences under GST.

What Does Section 73(5) Say?

Section 73(5) of the CGST Act, 2017 states that if a person voluntarily pays the tax, interest, and any other dues before the issue of the Show Cause Notice, the proper officer shall not issue the notice in respect of the tax so paid. This effectively closes the demand proceeding for that period and amount once DRC-03 is filed and accepted.

The key conditions under Section 73(5) are:

• Payment must be made before the SCN is issued under Section 73(1)
• The payment must cover the full tax liability plus applicable interest under Section 50
• The taxpayer must file the DRC-03 form on the GST portal to inform the officer of the payment
• No penalty is chargeable in this scenario (unlike post-SCN situations under Section 73(8) or Section 74)

Section 73 vs Section 74: What is the Difference?

Section 73 applies to cases of non-fraud, genuine errors or omissions in GST payments — such as underpayment of tax, wrong ITC claims, or short payment due to clerical mistakes. Section 74 applies where fraud, wilful misstatement, or suppression of facts is involved, attracting a mandatory penalty of 100% of the tax. Voluntary payment under DRC-03 on Section 73(5) grounds is only available for non-fraud scenarios.

Aspect	Section 73 (Non-Fraud)	Section 74 (Fraud)
Applicable Cases	Genuine errors, omissions, wrong ITC	Fraud, suppression, wilful misstatement
Penalty (Pre-SCN DRC-03)	Nil (only tax + interest)	Not available for pre-SCN waiver
Penalty (Post-SCN)	10% of tax or ₹10,000 (whichever is higher)	100% of tax demanded
Time Limit for SCN	3 years from due date of annual return	5 years from due date of annual return
Voluntary Payment Form	DRC-03 under Section 73(5)	DRC-03 under Section 74(5) with reduced penalty

When Should You File DRC-03?

Filing DRC-03 proactively is always the smarter choice. It is advisable in the following situations:

• You discover a tax shortfall in a previous GST return (e.g., GSTR-1 or GSTR-3B mismatch)
• You received a GST audit notice or are under departmental scrutiny and want to settle before escalation
• You find ineligible ITC was claimed under Section 17(5) and want to reverse it with interest
• You received an intimation from the GST officer (DRC-01A) asking for clarification before SCN
• Your GSTR-2B and GSTR-3B have mismatches that could trigger a demand notice
• You want to settle dues identified during an inspection under Section 67

If you have received a DRC-01 Show Cause Notice for wrong ITC claims, you may have missed the pre-SCN window. However, you can still file DRC-03 at reduced penalty even after SCN under Section 73(8).

How to File DRC-03 on the GST Portal?

Step 1: Log In to the GST Portal

Visit www.gst.gov.in and log in using your GSTIN credentials.

Step 2: Navigate to DRC-03

Go to Services > User Services > Intimation of Voluntary Payment – DRC-03.

Step 3: Select the Cause of Payment

Choose the appropriate reason for the voluntary payment from the dropdown — for example: "Section 73(5)" for suo motu payment before SCN, or "Audit", "Investigation", "Scrutiny", "Annual Return", etc., as applicable to your situation.

Step 4: Enter Liability Details

Mention the financial year, tax period, and the act (CGST/SGST/IGST/Cess). Enter the tax amount, interest amount, penalty (if any), and any other amount being paid.

Step 5: Pay Using Electronic Cash Ledger

Ensure your Electronic Cash Ledger has sufficient balance. If not, create a challan and deposit the amount first. DRC-03 payment can only be made from the cash ledger — ITC credit cannot be used to pay interest or penalties.

Step 6: Submit with DSC or EVC

Submit the form using your Digital Signature Certificate (DSC) or Electronic Verification Code (EVC). On successful filing, an ARN (Acknowledgement Reference Number) is generated.

Step 7: Intimation to the Officer

The GST officer is automatically notified of your payment. They will issue a DRC-04 (acknowledgement of voluntary payment) if the payment is accepted as full settlement of the demand.

How is Interest Calculated Under Section 50?

Interest under Section 50 of the CGST Act is charged at 18% per annum on the unpaid tax amount for the period of default — from the original due date of payment until the actual date of payment. For wrongly availed and utilised ITC, the interest rate is 24% per annum. Interest is mandatory even when filing DRC-03 voluntarily; it cannot be waived.

As an example: if you underpaid GST of ₹1,00,000 for July 2024 and you are filing DRC-03 in August 2026, interest at 18% per annum for approximately 24 months would be approximately ₹36,000 — bringing total dues to ₹1,36,000.

What If You Missed the Pre-SCN Window?

If the SCN has already been issued under Section 73(1), Section 73(5) no longer applies. However, under Section 73(8), if the taxpayer pays the tax, interest, and a reduced penalty of 25% of the tax within 30 days of the SCN, the adjudication proceedings are dropped. DRC-03 can still be filed at this stage to avail this reduced penalty benefit.

If you are facing a scrutiny notice for return discrepancies, it is best to consult a GST expert immediately to understand which stage you are at and what benefit is available.

Common Mistakes When Filing DRC-03

• Wrong reason selected: Selecting "Scrutiny" instead of "Section 73(5)" can affect penalty implications — always pick the correct cause
• Partial payment: Paying only the tax without interest does not qualify for the Section 73(5) exemption — full interest must be paid
• Using ITC for interest/penalty: Interest and penalty cannot be paid from the ITC ledger; use only cash ledger
• Not keeping proof of DRC-03 filing: Always save the ARN and DRC-04 acknowledgement as evidence that the liability was settled
• Filing after SCN is issued: If the SCN has already been issued, Section 73(5) does not apply; you need to follow Section 73(8) or adjudication procedures
• Wrong financial year or tax period: A mismatch in period can lead to the payment being unlinked from the demand

DRC-03 vs Amending GSTR-3B: Which Is Better?

For past period liabilities, you cannot amend GSTR-3B directly for closed tax periods. DRC-03 is the prescribed mechanism for paying any tax shortfall for prior periods. Attempting to adjust liabilities through current period returns without filing DRC-03 can invite notices for the current period mismatch as well. DRC-03 provides a clean, documented record of voluntary settlement that protects you from future proceedings on that specific demand.

If you are also concerned about GST notices due to GSTR-3B and GSTR-2B ITC differences, addressing those proactively via DRC-03 is the safest route.

How Taxocity Can Help You

Taxocity has been helping Indian businesses navigate GST compliance for over three decades. Our team of real GST experts handles end-to-end DRC-03 filings — from identifying the correct liability amount and applicable interest, to selecting the right cause of payment, filing on the portal, and obtaining the DRC-04 acknowledgement.

With a 4.8/5 rating from 5,000+ reviews and a 100% compliance guarantee, we ensure your voluntary payment under Section 73(5) is filed correctly the first time — protecting you from penalties and future notices. Whether you have received a department intimation or identified a shortfall yourself, our experts are available to guide you step by step.

We also support you with:

• GST return filing to avoid future mismatches
• GST registration for new businesses
• Responding to DRC-01 Show Cause Notices
• Handling GST notices for ineligible ITC under Section 17(5)

Key Takeaways

1. DRC-03 voluntary payment under Section 73(5) saves you from penalty — only tax and interest are due
2. Payment must be made before the Show Cause Notice is issued by the GST officer
3. Interest at 18% per annum (or 24% for wrong ITC utilisation) is mandatory and cannot be waived
4. Payment must be made only through the Electronic Cash Ledger — ITC cannot be used for interest
5. After filing, the officer issues DRC-04 as acknowledgement that proceedings are dropped
6. If SCN has already been issued, you can still get a reduced 25% penalty benefit under Section 73(8) within 30 days
7. Always select the correct cause in the DRC-03 form — "Section 73(5)" for suo motu pre-SCN payment

Frequently Asked Questions

Is there any penalty when filing DRC-03 under Section 73(5)?

No penalty is levied when a taxpayer voluntarily pays the full tax and interest before the Show Cause Notice is issued. Section 73(5) of the CGST Act explicitly provides that no SCN shall be issued once such payment is made, and since the proceedings are dropped, penalty under Section 73(9) does not arise.

Can I use ITC balance to pay DRC-03?

ITC can be used only for paying the tax component in DRC-03. Interest and penalty must be paid from the Electronic Cash Ledger. However, in most voluntary payment scenarios, using available ITC for the tax portion and cash for interest is permissible.

Is there a deadline to file DRC-03 under Section 73(5)?

There is no specific deadline prescribed for filing DRC-03 under Section 73(5) on a suo motu basis. However, it must be filed before the SCN is issued. The department has up to 3 years from the due date of the annual return to issue a Section 73 SCN, so acting promptly on identifying a shortfall is critical.

Can DRC-03 be filed for multiple tax periods at once?

Each DRC-03 filing covers a specific tax period (month/quarter). If liabilities exist across multiple periods, separate DRC-03 forms must be filed for each tax period. Taxocity's compliance team can assist in computing and filing DRC-03 for all affected periods efficiently.

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Disclaimer: This article is intended for general informational purposes only and does not constitute tax, legal, or professional advice. GST laws are subject to amendments and notifications from the government. Please consult a qualified tax advisor or GST practitioner before making any decisions regarding your GST compliance or voluntary payments.