Audit observation payment via DRC 03

[SANTOSH PATIL]

Respected Sirs,

In our GST audit U/s 65 observation was made that interest on delay in filing GSTR 3B was not paid along with returns from July 2017 to March 2020. Now they have sent me letter ADT 02 stating that it is observed in audit that interest amounting to Rs. 1 lakh has not been paid from July 2017 to March 20. Kindly pay above interest. Now when i contected proper officer he said to pay through DRC 03 in single challen. DRC 03 is accepting year wise interest. Office is saying pay in 2019-20 and under reason mention period July 2017 to March 2020. Is it correct procedure, your guidance will be highly appreciated

[Amit Agrawal]

In my view, interest should be paid through Form DRC-03year-wise only (& NOT in single challan). And you can submit all three year-wise interest paid Form DRC-03 to the officer in compliance with the audit observations.

All above are strictly personal views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Also, before making payment year-wise, kindly explain the officer that while filing DRC-03 system / portal itself asks for year-wise payment only. And it is better even for electronic records, tracking and future references for assesses and Dept if outstanding interest is paid year-wise only.

Anyway, audit objection mentions period from July, 2017 to March, 2020. Hence, it is better to pay year-wise considering the fact that portal does not allow choosing such multiple year period.

[Ravinesh Sinha]

It is proper to pay interest FY otherwise jurisdiction officer may face difficulty to verify interest quantification and correlation with tax due and late payment at the time issuance of acknowledgement in Form DRC 4.

But some time system does not allow payment for previous year .in this case ,try to put year wise details in remarks space with reference letter of audit .

[Ganeshan Kalyani]

I agree with both the experts. Interest to be paid year wise.

[KASTURI SETHI]

Sh.Santosh Patil Ji,

You are depositing interest on being pointed out by the Audit Officer. You have department's letter in the form of ADT-02 (Documentary evidence). So if you deposit interest for the period from July, 17 to March, 20 in a single challan, you will not find any problem inasmuch as ADT-02 is self-explanatory. I mean to say Proper Officer has rightly advised you.

[SANTOSH PATIL]

Respected sirs, I had mailed to CGST Auditors saying that we feel that it is proper to pay interest FY wise otherwise juridiction officer may face difficulty to verify interest quantification and correlation with tax dues and late payment at the time issuance of acknowledgement in Form DRC 4 to which officer replied by mail to pay interest yearwise. we have asked officer to provide breakup of interest yearwise.

Thanks for experts advise and support

[Amit Agrawal]

You are welcome!

[POOJA AGARWAL]

Dear Mr. Patil,

Please keep in mind that interest is payable in late deposit of taxes and not on late filing of GSTR-3B. For late filing of GSTR-3B a separate late fee is payable and interest liability is subject to debate, if the amount was available in Electronic Credit Ledger or Electronic Cash ledger. Further as per latest decisions of Hon'ble Jharkhand High Court even the interest demand has to be raised vide proper Show Cause Notice U/s 73(1)/74(1). Please refer the judgement in the matter of Mahadeo Construction Co. Vs UOI & Others 2020 (4) TMI 666

AI Summary

Interest on late tax deposit should be paid year wise via DRC-03 to align with portal and audit records. Interest identified in ADT-02 should be paid through Form DRC-03 year wise because the portal requires year selection and year wise payment aids reconciliation for issuance of Form DRC-04. If the system disallows prior years, include year wise details in remarks with a reference letter. Note that interest is payable for late deposit of tax (not merely late filing) and may depend on electronic ledger balances; a departmental interest demand may also require a proper show cause notice.