DRC 03 PAAYMENT

[SANTOSH PATIL]

During Audit u/s 65, it was observed there was short payment of 9 lakh for the period 17-18, 18-19, 19-20, 20-21. Auditor has sent ADT 02 with their observation of short payment of 9 lakh. Ten lakh ITC is available in credit ledger as on date, can we pay demand raised under audit observation by DRC 03 utilising credit balance available in portal.

[Alkesh Jani]

Shri

Please refer Sl.No.06, 07 and 08 of Circular No.172/2022 dated 6th July, 2022. Also refer Sl.No.07 column No. 10 of DRC-03.

Thanks

[Padmanathan KV]

If the short payment is on account of RCM, ITC cannot be utilized. Output tax (other than RCM), can be paid using ITC.

AI Summary

Can Input Tax Credit be used to settle audit demand via DRC 03 under Section 65? Clarifications provided. During an audit under Section 65, a short payment of 9 lakh was identified for the periods 2017-2021. The auditor issued ADT 02 noting this shortfall. There is currently a 10 lakh Input Tax Credit (ITC) available in the credit ledger. The query raised was whether this ITC can be used to settle the demand noted in the audit observation via DRC 03. One response advised consulting specific sections of a circular and DRC-03, while another clarified that ITC cannot be used for Reverse Charge Mechanism (RCM) payments, but can be used for other output tax payments.