1. As per Circular to clarify by CBEC-20/16/12/2020- GST in FAQ, it has been provided that: Once a business entity defaults certain threshold amount under the IBC, 2016, corporate Insolvency Resolution Process (CIRP) gets triggered and the management of such business entity or Corporate Debtor and its assets vests with an Interim Resolution Professional (“IRP”) or Resolution Professional (“RP”).
It continues to run the business and operations of the said business entity as a going-concern till the insolvency proceedings are over and an order have been passed by the National Company Law Tribunal (“NCLT”). To address these problems, a notification has been issued by the Government dated 21.03.2020, notification No. 11/2020- Central Tax prescribing special procedure under Section 148 of the Central Goods & Services Tax, 2017 (“CGST Act, 2017”) for the corporate debtors who are undergoing CIRP under the provisions of IBC, 2016 and the management of whose affairs are being undertaken by IRP/RP.
2. The mode of handling dues under GST for pre-CIRP period: According to the provisions of the IBC, 2016 and various pronouncements on this issue, a coercive action cannot be taken against the corporate debtor with respect to the dues for period prior to insolvency commencement date. The dues of the period prior to the commencement of CIRP will be treated as an ‘operational debt’ and its claims may be filed by the proper officer before the NCLT in accordance with the provisions of the IBC.
The tax officers shall seek the details of supplies made/ received and total tax dues pending from the corporate debtor to file the claim before the NCLT. Moreover, Section 14 of the IBC, 2016 mandates the imposition of a moratorium period, wherein the institution of suits or continuation of pending suits or proceedings against the corporate debtor is prohibited.
3. GST registration of corporate debtor: It is clarified that the GST registration of an entity for which CIRP has been initiated should not be cancelled under the provisions of Section 29 of the CGST Act, 2017. The proper officer may, if need be, suspend the registration. In case, the registration of an entity undergoing CIRP has already been cancelled and it is within the period of revocation of cancellation of registration, it is advised that such cancellation may be revoked by taking appropriate steps in this regard.
4. IRP/RP liable to file returns of pre-CIRP period: According to the provisions of IBC, 2016, the IRP/ RP is under an obligation to comply with all legal requirements for period after the Insolvency Commencement Date. Accordingly, it is clarified that the IRP/ RP are not under an obligation to file returns of pre-CIRP period.
5. New registration to be taken by the corporate debtor during the CIRP period: The corporate debtor undergoing CIRP is to be treated as a distinct person of the corporate debtor and it shall be liable to take a new registration in each State or Union Territory where the corporate debtor was earlier registered, within thirty days of the appointment of the IRP/RP. Further, in cases, where the IRP/ RP has been appointed prior to the issuance of notification No. 11/2020- Central Tax, dated 21.03.2020, he shall take registration within thirty days of issuance of the notification, w.e.f. the date of his appointment as IRP/RP.
6. Filing first return after obtaining new registration: The IRP/RP will be liable to furnish returns, make payment of tax and comply with all the provisions of the GST law during the period of CIRP. The IRP/RP is required to ensure that the first return under Section 40 of the GGST Act, 2017, for the period beginning the date on which it became liable to take registration till the date on which registration has been granted.
7. Availing ITC for invoices issued to the registered person in case the IRP/RP has been appointed before issuance of notification No. 11/2020-Central Tax, dated 21.03.2020 and in case where no return has been filed by the IRP during the CIRP: As per the special procedure provided under Section 148 of the CGST Act, 2017 has provided the manner of availment of ITC while furnishing the first return under Section 40 of the CGST Act, 2017.
The said classes of persons shall, in his first return, be eligible to avail input tax credit on invoices covering the supplies of goods or services or both, received since appointment as IRP/RP and during the CIRP period but bearing the GSTIN of the registered person, subject to the conditions stated under Chapter V of the CGST Act, 2017 and rule made thereunder, except the provisions of Section 16(4) of the CGST Act, 2017 and sub-rule (4) of the CGST Rules. In terms of the special procedure under Section 148 of the CGST Act, 2017 issued vide Notification No. 11/2020-Central Tax, dated 21.03.2020. This exception is made only for the first return filed under Section 40 of the CGST Act, 2017.
8. Availing ITC for invoices by persons who are availing supplies from the corporate debtors undergoing CIRP, in cases where the IRP/RP was appointed before the issuance of the Notification No. 11/ 2020- Central Tax, dated 21.03.2020: Registered persons receiving supplies from the said classes of persons shall, for the period from the date of appointment of IRP/RP till the date of registration as required in this notification or 30 days from the date of this notification, whichever is earlier, be eligible to avail input tax credit on the invoices issued using the GSTIN of the registered person, subject to the conditions of Chapter V of the CGST Act, 2017 and rule made thereunder, except the provisions of Rule 36, sub-rule (4) of the CGST Rules.
9. Some of the IRP/RPs have made deposit in the cash ledger of registration of corporate debtor. Claiming refund for the amount deposited in the cash ledger by the IRP/ RP will be done by: Any amount deposited in the cash ledger by the IRP/RP, in the existing registration, from the date of the appointment of the IRP/RP, to the date of notification specifying the special procedure for corporate debtors undergoing CIRP, shall be available for refund to the registration under the head ‘refund of cash ledger’, even though the relevant FORM GSTR-3B /GSTR-1 are not filed during the said period. The instructions contained in Circular No. 125/44/2019- GST dt. 18.11.2019 stands modified to this extent.
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