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. It is also an enforceable document to initiate tax recovery proceedings and serves as a clear record for the taxpayer regarding the dues payable.
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Additionally, it sets the timeline for appeal if the taxpayer chooses to dispute the findings. This process ensures transparency and closure in tax proceedings.
Legal Provisions Involved
DRC-07 is issued under:
- Section 73: For tax dues where there is no element of fraud or willful misstatement
- Section 74: For tax evasion involving fraud, misrepresentation, or suppression of facts
The penalties differ based on the applicable section. Under Section 73, the penalty is 10% of the tax or ₹10,000, whichever is higher. Under Section 74, it can go up to 100% of the tax due.
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Structure and Contents of DRC-07
Form DRC-07 includes the taxpayer’s GSTIN, order reference number, applicable tax period, and a detailed breakup of tax, interest, penalty, and fees. It also outlines payment instructions and the consequences for non-compliance.
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The form is digitally signed and automatically uploaded to the GST portal for access by the taxpayer.
Responding to DRC-07
Taxpayers must pay the liability within 30 days of receiving DRC-07. Payment should be made via DRC-03 and reflected in the electronic cash ledger. Once paid, DRC-04 can be submitted as proof of settlement.
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If the liability is not paid within the stipulated time, the department may initiate recovery actions under Section 79 of the CGST Act.
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Conclusion
DRC-07 in GST plays a vital role in tax recovery by summarizing and communicating adjudicated tax liabilities. It formalizes the tax authority’s claim after due legal procedure and initiates the recovery timeline. Timely understanding and resolution of DRC-07 notices can help taxpayers avoid unnecessary litigation, interest, and penalties.
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.
