What is DRC-07 in GST? Tax Recovery and Assessment
Under India’s Goods and Services Tax (GST) system, compliance and enforcement are governed by a structured process involving multiple forms and procedures. One critical element of this framework is Form DRC-07, which plays a key role in the determination and recovery of tax liabilities. It is used by tax authorities to officially communicate a taxpayer’s dues after a proper adjudication process.
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What is DRC-07 in GST?
Form DRC-07 is a digitally generated summary of an adjudication order issued by a GST officer under Section 73 or Section 74 of the CGST Act, 2017. It communicates the final liability of a taxpayer in cases involving:
- Non-payment or short payment of tax
- Incorrect or excess claims of Input Tax Credit (ITC)
- Erroneous refunds
It serves as the final determination of tax, interest, and penalty due after the adjudication process, which includes a show cause notice, submission of a response, and possibly a hearing.
Purpose of DRC-07
DRC-07 serves as:
- A formal demand notice summarizing the outcome of an adjudication order
- An enforceable document to initiate tax recovery proceedings
- A trigger for appeal timelines and settlement opportunities
Legal Provisions and Penalties
DRC-07 is issued under:
- Section 73: For cases without fraud or willful misstatement
- Section 74: For cases involving fraud or suppression of facts
| Provision | Penalty |
|---|---|
| Section 73 | 10% of tax due or ₹10,000, whichever is higher |
| Section 74 | Up to 100% of the tax due |
Structure and Contents of DRC-07
- GSTIN and legal name of taxpayer
- Adjudication order number and date
- Tax period covered
- Breakdown of tax, interest, penalty, and fee
- Payment instructions and legal consequences
Process Leading to DRC-07 Issuance
The issuance of DRC-07 follows a legal sequence:
- Show Cause Notice (DRC-01) is served
- Taxpayer replies via DRC-06
- Hearing is conducted, if required
- Adjudication order is passed
- DRC-07 is issued as the final liability communication
How Should Taxpayers Respond?
Taxpayers must pay the amount within 30 days of the order using:
- Form DRC-03 for voluntary payment
- Electronic Cash Ledger via the GST portal
Once paid, file DRC-04 to confirm the closure of liability.
Example and Practical Case
Suppose ABC Pvt. Ltd. wrongly avails ₹5,00,000 as ITC. After issuing DRC-01 and reviewing DRC-06, the officer confirms the liability:
- Tax: ₹5,00,000
- Interest: ₹60,000
- Penalty: ₹50,000
This summary is uploaded through DRC-07. If not paid within 30 days, the department initiates recovery under Section 79.
Common Issues & Best Practices
- Log in regularly to the GST portal to avoid missing notices
- Maintain reconciliations of ITC and tax liabilities
- Use expert help for replying to SCNs or appealing orders
Conclusion
Form DRC-07 in GST formalizes the tax officer’s assessment after adjudication and is critical for initiating recovery actions. It ensures legal closure of disputes under Section 73 or 74. Businesses must monitor their GST portal for such notices and take timely action to avoid litigation, interest, or coercive recovery procedures.
Explore More – All About DRC-03: Voluntary Tax Payment
I am a Chartered Accountant with 5 years of experience specializing in GST, income tax, and HSN code classification. I help businesses with GST compliance, tax planning, and financial advisory, ensuring they meet regulatory requirements while optimizing their tax strategies. I aim to simplify GST filings, income tax laws, and HSN code classifications, helping professionals and business owners stay informed and compliant.
