ASC Legal, Solicitors and Advocates.

View this email in your browser

April, 2020

GST Compliance for Corporate Debtors Undergoing Corporate

Insolvency Resolution Process

As per the Insolvency and Bankruptcy Code, 2016 (IBC), once an entity defaults the prescribed threshold
amount and eventually the due process of the Corporate Insolvency Resolution Process (CIRP) gets invoked, the
management of such entity (Corporate Debtor) and its assets, then vest with an Interim Resolution Professional
(IRP) or Resolution Professional (RP). 

Thereafter, the business and affairs of said entity continues as a going concern till such insolvency proceedings
are over.
 
It has been observed in the past that National Company Law Tribunal (NCLT) has directed the tax authorities
not to insist upon payment of past tax dues from the Corporate Debtor  in view of the Moratorium provided
under Section 14 of IBC.

Further, as per provisions of Central Goods and Services Tax Act, 2017 (CGST Act), taxpayer cannot
discharge current dues/ liability while keeping the past dues/ liability pending, since provisions of the CGST Act
prohibits filing of current period returns unless returns of old tax period are filed.
 
Therefore, there is no enabling provision under the CGST Act which allows the Corporate Debtor to file returns
and discharge the current GST dues/ liability (pertaining to the period post commencement of CIRP), while the
past GST dues/ liability (pertaining to the period prior to commencement of CIRP) is pending. 
 
In this regard, one of the important decisions taken by the GST Council in its 39th meeting held on March 14,
2020 was to facilitate such entities undergoing CIRP under the IBC.
 
In pursuance thereof, Notification No.11/2020- Central Tax, dated March 21, 2020 was issued by the Central
Board of Indirect Taxes and Customs (CBIC) prescribing a special procedure for the Corporate Debtors who
are undergoing CIRP under the provisions of IBC and the management of whose affairs are being undertaken by
IRP/ RP.

The salient highlights of the same has been summarized below:

 
Registration
 
Corporate Debtor to obtain a new GST registration in each of the States or Union territories where such
Corporate Debtor was registered earlier. Such registration to be obtained within thirty days of the
appointment of the IRP/RP.
 
In situations where the IRP/RP has been appointed prior to the date of this notification, the GST registration to
be obtained within thirty days from the commencement of this notification (30 days from March 21, 2020),
effective from date of his appointment as IRP/RP.
 
GST Tax Return
 
After procuring GST registration, Corporate Debtor shall file the “first return” prescribed under section 40 of the
CGST Act, from the date on which the Corporate Debtor becomes liable to registration till the date on which
registration has been granted.
 
Furthermore, the Corporate Debtor will also be liable to furnish returns, make payment of tax and comply with
all the provisions under the CGST Act during CIRP period.
  
Input Tax Credit
 
The Corporate Debtor in the first return shall be eligible to avail input tax credit on invoices relating to the
supplies received since commencement of CIRP. 

Such availment shall be subject to Chapter V (dealing with Input Tax Credit) of the CGST Act.
 
Additionally, the CBIC has issued Circular No.134/04/2020-GST dated March 23, 2020 which seeks to clarify
some issues in this regard.
 
The same has been usefully tabulated below:
 

Pre CIRP-Period

Particulars Clarification

GST Dues In accordance with the provisions of the IBC and in

consideration of available legal pronouncements, no coercive
action 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
shall be treated as ‘operational debt’ and 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 necessary claim before the
NCLT.
 

2
 Section 14 of the IBC 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.
 

GST registration of an entity for which CIRP has been

GST Registration of Corporate Debtor
initiated should not be cancelled under the provisions of
Section 29 of the CGST Act. The proper officer may, if
required, 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.

In accordance with the provisions of IBC, the IRP/ RP is

under obligation to comply with all legal requirements for
period after the Insolvency Commencement Date.
GST Returns Filings by IRP/RP  
Accordingly, the IRP/ RP are not under an obligation to file
GST returns of Pre-CIRP period.
 

During CIRP-Period

Particulars Clarification

The Corporate Debtor who is undergoing CIRP shall be liable

to take a new registration in each State or Union territory
where the Corporate Debtor was registered earlier, within
thirty days of the appointment of the IRP/ RP.
 
GST Registration
Further, in cases where the IRP/ RP has been appointed prior
to the issuance of notification No.11/2020- Central Tax, dated
March 21, 2020, such Corporate Debtor shall take registration
within thirty days of issuance of the said notification,
effective date of his appointment as IRP/RP.
 

GST Returns
The IRP/ RP shall be liable to furnish returns, make payment

3
 of tax and comply with all the provisions of the
GST law during CIRP period.
 
The IRP/RP is required to ensure that the first return is filed
under Section 40 of the CGST Act, for the period beginning
the date on which it became liable to take registration till the
date on which registration has been granted.
 

Input Tax Credit can be availed in the first return to be filed

Availment of input tax credit for invoices
issued to the erstwhile registered person in
case the IRP/ RP has been appointed before
issuance of Notification No.11/2020- Central
Tax, dated March 21, 2020 and no return has
been filed by the IRP during the CIRP.
under Section 40 of the CGST Act 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 erstwhile registered person, subject
to the conditions of Chapter V of the CGST Act and relevant
rules made thereunder.
This exception is made only for the first return filed under
Section 40 of the CGST Act.

Any amount deposited in the cash ledger by the IRP/RP, in

Refund claim for amount deposited in the
cash ledger of erstwhile GST registration of
the corporate debtor by the IRP/RP
the existing registration, from the date of appointment of
IRP / RP to the date of notification specifying the special
procedure for corporate debtors undergoing CIRP, shall be
available for refund to the erstwhile registration under the
head refund of cash ledger, even though the relevant FORM
GSTR-3B/ GSTR-1 are not filed for the said period.
 
(GSTR-3B is a self-assessment return filed by the taxpayer
stating the details for Outward Supplies and Inward Supplies
i.e. Purchases and Expenses. This return is required to be
filed on a monthly basis irrespective of the turnover.
GSTR-1 is a monthly or quarterly return which states the
details of all outward supplies i.e. turnover along with their
tax liability.)

ASC Legal Comments

The initiative of the GST Council in notifying the said rules can be seen as a facilitative measure considering the
difficulties being faced by entities under CIRP, particularly the inability to claim input tax credit for the CIRP
period without clearing and making good the past tax liabilities.
 
However, the said Notification still has several gaps, and is likely to create some confusion. For instance, the

4
said Notification has not envisaged the consequences of situations where the CIRP may result into
several possible evolutionary possibilities including that the entity may get revived under a resolution plan,  may
slip into liquidation, CIRP proceedings may get withdrawn etc. 

Further, nothing has been prescribed in the Notification with regard to carry forward of input tax credit of the
erstwhile GST registration, as on the date of commencement of the CIRP.

Therefore, in order or provide clarity and certainty, detailed rules and procedure must be prescribed covering
various situations.  

Hope the above would be useful.

 
In case of any assistance/ further clarification required, please do let us know.

Please note that in the light of potential  impact of COVID-19 Pandemic, we are currently operating at the
usual capacity, but working remotely to mitigate the risk and spread of the virus. Wherever possible, shall
perform client meetings "online" rather than face-to-face, keeping in view all government guidelines with
respect to outstation travels, including international travel. We would strive in ensuring that professional
practice and client commitments are adhered to and well taken care of during these challenging times.

Wishing Good Health

With kind regards,

Aseem & Team

FOR PRIVATE CIRCULATION ONLY

5
Disclaimer: The contents of this update is based on extant laws, rules and regulations
made thereunder at the time of compiling of the said newsletter. This newsletter is for information and
general guidance purposes only. We have no responsibility for the persistence and the accuracy of the
information relied upon for the purposes of compiling this newsletter and the said update does not
constitute any professional advice. One should not act upon the information contained in this update
without obtaining specific professional advice. No representation or warranty (express or Implied) is
given as to the accuracy or completeness of the information contained in this news update and ASC
Legal disclaims all responsibility for any damage caused by error/ omissions whether arising from
negligence, accident or any other cause to any person acting or refraining from action as a result of
this professional update

Copyright © 2020 ASC Legal, Solicitors and Advocates, All rights reserved.

You are receiving this email because you are part of subscriber list of ASC Legal, Solicitors and
Advocates.

Our mailing address is:

ASC Legal, Solicitors & Advocates 
E-200, 1st Floor, Greater Kailash, Part-I
New Delhi -110048 ( India)
Tel: + 91 11 46056282, + 91 11 46054868
Facsimile + 91 11 46052606

Add us to your address book

Want to change how you receive these emails?

You can update your preferences or unsubscribe from this list.