GST WEEKLY UPDATE :50/2025-26 (15.03.2026) By CA Vipul Khandar

Reading Time: 7 minutes

-By CA Vipul Khandhar

1. Linking Voluntary Payments with Demand Orders: GSTN Advisory on Pre-Deposit Payment through DRC-03 and DRC-03A:

Introduction

Under the Goods and Services Tax (GST) regime, filing an appeal before the First Appellate Authority requires the taxpayer to make a mandatory pre-deposit in terms of Section 107(6) of the CGST Act, 2017. In practice, many taxpayers voluntarily deposit certain amounts during investigation proceedings through Form GST DRC-03.

However, while filing appeals against demand orders, taxpayers frequently encounter a system-generated requirement to deposit the pre-deposit again, even though sufficient payment had already been made earlier through DRC-03.

To address this recurring issue, the GSTN issued an important advisory clarifying the mechanism for adjustment of payments made through Form GST DRC-03 while filing appeals.

Background of the Issue

During departmental investigations or audits, taxpayers often make voluntary tax payments using Form GST DRC-03 to demonstrate cooperation or to avoid interest and penalties.

Subsequently, when the proper officer issues a demand order (generally in Form GST DRC-07), the taxpayer may decide to challenge the demand before the First Appellate Authority.

For filing such appeal, Section 107 requires payment of:

1. Full admitted liability, and
2. 10% of the disputed tax amount as pre-deposit.

The GST portal automatically verifies whether the required amount has been paid before allowing filing of the appeal.

However, taxpayers noticed that amounts already paid through DRC-03 were not being considered by the portal while calculating the mandatory pre-deposit.

Reason for the System Mismatch

The core issue lies in the technical accounting structure of the GST portal.

When a demand order is issued, the system automatically generates a Demand ID in Part II of the Electronic Liability Register.

Payments made through the portal under “Payment towards Demand” are automatically linked with this Demand ID and reflected in the liability register.

However:

• Payments made through Form GST DRC-03 are not automatically mapped to any Demand ID.
• Consequently, such payments do not appear as adjusted against the demand order in the Electronic Liability Register.

Therefore, the portal assumes that no payment has been made against the demand, even if the taxpayer had already deposited the amount voluntarily during investigation.

GST Portal Logic While Filing Appeals

While filing an appeal on the GST portal, the system automatically calculates the total required payment consisting of:

• Admitted tax amount
• Mandatory pre-deposit

The portal then verifies whether any payment is recorded against the Demand ID.

Two possible situations arise:

1. Payment Equal to or Greater Than Required Amount

If the amount already adjusted against the demand ID is equal to or greater than the required pre-deposit, the portal allows filing of the appeal without further payment.

2. Payment Less Than Required Amount

If the portal does not detect sufficient payment against the demand ID, it mandates additional payment before permitting appeal filing.

Since payments through DRC-03 are not automatically linked, the portal usually treats them as unadjusted payments, resulting in duplicate payment requirements.

Corrective Mechanism: Filing Form GST DRC-03A

To resolve this issue, the advisory clarifies that taxpayers must link voluntary payments made through DRC-03 with the relevant demand order by filing Form GST DRC-03A.

Purpose of DRC-03A

Form GST DRC-03A enables taxpayers to:

• Map the earlier DRC-03 payment
• With the specific Demand ID generated in DRC-07

Once the form is filed:

• The payment gets tagged to the demand order
• The entry appears in Electronic Liability Register (Part II).

As a result, the system recognizes the payment during the appeal filing process.

Practical Implications for Taxpayers

The advisory has important procedural implications:

1. Avoidance of Duplicate Pre-Deposit

Taxpayers who have already paid substantial amounts through DRC-03 can avoid making additional pre-deposit payments.

2. Accurate Liability Reflection

Linking through DRC-03A ensures that the Electronic Liability Register correctly reflects adjusted payments.

3. Smooth Appeal Filing

Once the payment is mapped to the demand order, the portal automatically considers the payment while calculating the mandatory pre-deposit.

Recommended Compliance Steps

Tax professionals and taxpayers should follow the following steps before filing an appeal:

1. Verify whether any payment was made through Form GST DRC-03 during investigation.
2. Check whether the payment appears against the Demand ID in the Electronic Liability Register.
3. If not reflected, file Form GST DRC-03A to link the payment with the demand order.
4. Confirm that the payment is properly adjusted.
5. Proceed with appeal filing on the GST portal.

Conclusion

The advisory clarifies an important procedural gap in the GST portal relating to adjustment of voluntary payments made during investigations. By introducing the facility of Form GST DRC-03A, the GST system now enables proper mapping of payments with demand orders, ensuring that taxpayers are not compelled to deposit the pre-deposit amount twice.

Tax practitioners should ensure that all voluntary payments made through DRC-03 are appropriately linked with the demand order prior to filing appeals, thereby ensuring compliance with Section 107 while avoiding unnecessary financial blockage.

2. GST ALERT FOR TAXPAYERS: Risk of GST Registration Suspension if “Welcome Kit” is Returned Undelivered:

Taxpayers that have recently obtained GST registration must ensure that their registered place of business is accurate, functional, and accessible. Tax professionals have cautioned that GST registrations may face suspension or cancellation if the physical “welcome kit” sent by the tax authorities is returned undelivered.

Background

Following the introduction of fast-track GST registration, many applicants are now receiving registration approvals within a very short time. Under Rule 14A of the CGST Rules, low-risk applicants can obtain GST registration quickly through PAN and Aadhaar authentication.

Rule 14A of the CGST Rules

In numerous cases, GSTINs are issued within a few hours of application, significantly accelerating the registration process.

Verification Through Physical Welcome Kit

After granting registration, the GST department sends a physical “welcome kit” or welcome letter through India Post to the registered place of business declared in the GST application.

This dispatch acts as an additional verification mechanism to confirm the existence and accessibility of the business at the declared address.

Issue Observed by Tax Experts

Tax experts have observed that in several instances the welcome kit returns unserved or undelivered because:

• The premises are locked
• The business has not yet commenced operations
• The entity has not shifted to the declared premises
• The address provided in the application is incomplete or incorrect

When the postal article returns undelivered, the GST department may suspect that the registration pertains to a fake or non-existent entity.

Consequences

In such situations, the department may initiate proceedings under the GST law and issue a Show Cause Notice for cancellation of GST registration.

Rule 21 of the CGST Rules

Authorities may view the non-delivery as an indicator that:

• The taxpayer is not conducting business from the registered location, or
• The entity may be fictitious or non-genuine.

This may ultimately result in suspension or cancellation of GST registration.

Advisory for Newly Registered Businesses

Taxpayers who have recently obtained GST registration should take the following precautions:

1. Ensure the registered address is correct and complete.
2. Keep the premises accessible during working hours, especially in the initial weeks after registration.
3. Display the business name and GSTIN board at the registered premises.
4. Maintain proper documentation such as rent agreement, electricity bill, and authorization from the property owner.
5. Track postal communication from the GST department or India Post.
6. In case the premises is temporarily closed, ensure someone is available to receive official correspondence.

GST Portal Functionality enhancement: The report highlights several system enhancements and new features introduced on the GST portal aimed at improving transparency, operational efficiency and taxpayer compliance.

Key Developments

1. Audit Module Enhancements:

The system now allows simultaneous allocation and modification of multiple audit cases. Audit Commissioners can allocate cases to Senior Audit Officers and audit teams through the portal. Additional features include Excel download of audit case details, improved filtering options and the ability to modify audit team members or Chartered Accountants in special audit cases.

2. Back-Office Improvements:

The Record Search functionality has been upgraded to enable searches using ARN, Case ID, Order Number, Notice ID or GSTIN. Search results now display additional information such as Form Type and Tax Period. Improvements have also been made to taxpayer jurisdiction updates, including transfer of pending applications and correction of search errors for temporary IDs.

3. Enforcement Module Updates

The portal now allows enquiry cases to be closed by either the initiating or responding officer. A new “Close Enquiry Case” tab has been introduced to record proceedings before closure. Once closed, automatic email and system alerts are generated for concerned officers.

4. Registration and Taxpayer Services

A simplified GST registration mechanism under Rule 14A of the CGST Rules has been introduced, allowing certain low-risk applicants to obtain registration within three working days through PAN and Aadhaar authentication.

Integration with India Post now enables automated welcome letters for newly registered taxpayers, along with delivery tracking by tax authorities. The Aadhaar authentication system has also been enhanced to include foreign national identification and Aadhaar expiry details.

5. Returns and Compliance Changes

Important changes have been made in GSTR-3B, including locking of Table 3.2 and revised auto-population rules. Additionally, taxpayers can now perform bulk search of Bill of Entry records through ICEGATE using Excel uploads. Updates have also been implemented in GSTR-9 and GSTR-9C reporting and computation fields.

6. Refund and Prosecution Modules

The Refund module has been strengthened to ensure proper reassignment of applications when a taxpayer’s jurisdiction changes. Further, functionalities relating to prosecution and compounding proceedings have been enabled for officers of Central Board of Indirect Taxes and Customs.

7. Payment and Portal Updates

Taxpayers in Chhattisgarh can now make GST payments using Credit/Debit Cards or BHIM UPI through the portal. Additional improvements have been made in taxpayer consent management and Goods Transport Agency (GTA) declaration messages.

3. AAR & Important Judgements:

(i) AAAR On GST Not Payable on DMF Contribution; Payable on NMET Contribution:

(Applicant – The Singareni Collieries Company Limited)

The Telangana Appellate Authority for Advance Ruling (AAAR) has partially modified the earlier ruling of the Telangana Authority for Advance Ruling (AAR) concerning the GST treatment of statutory payments made under the Mines and Minerals (Development and Regulation) Act, 1957 by a government-owned coal mining entity.

Issue

Whether the statutory contributions to DMF and NMET constitute consideration for a taxable supply under the Central Goods and Services Tax Act, 2017 or are merely statutory levies not subject to GST.

Findings of AAAR

The AAAR observed that the mining activities undertaken by the applicant constitute “business” under the CGST Act, and the statutory payments arise directly in the course or furtherance of such business activities.

The Authority further clarified that:

• Donations are voluntary, whereas contributions to DMF and NMET are mandatory statutory payments calculated as a fixed percentage of royalty.
• Such payments are not voluntary contributions but statutory levies linked to mining operations.

Reliance on CBEC Circular

Referring to CBEC Circular No. 206/18/2023-GST, the AAAR noted that the circular specifically clarifies that contributions made to the District Mineral Foundation (DMF) are not liable to GST.

However, since the circular does not extend the same clarification to NMET contributions, the Authority held that GST continues to apply on payments made towards NMET.

Ruling

The AAAR therefore modified the AAR ruling and held:

• GST not payable on contributions to DMF
• GST payable on contributions to NMET

The appeal was allowed partly, and the ruling was made prospective in nature, with no refund permitted for GST already paid.

Significance

The decision provides important clarity for the mining sector regarding the GST treatment of statutory contributions under the MMDR Act. It distinguishes between statutory levies exempted through specific circulars and those still treated as taxable consideration, thereby guiding mining companies on the correct GST compliance for such payments.

Disclaimer:

This publication contains information for general guidance only. It is not intended to address the circumstances of any particular individual or entity. Although the best of endeavour has been made to provide the provisions in a simpler and accurate form, there is no substitute to detailed research with regard to the specific situation of a particular individual or entity. We do not accept any responsibility for loss incurred by any person for acting or refraining to act as a result of any matter in this publication.

(Author is a well known Chartered Accountant practicing on Direct and Indirect Tax at Ahmedabad)