GST Implication under IBC Code on Corporate Debtors

In this article we will understand implication of GST on corporate debtors under IBC. When entity defaults certain threshold amount then CIRP (Corporate Insolvency Resolution Process) is initiated. Here we will understand, when new GST registration is required, how we can avail GST input credit and how we can claim refund of GST paid.

Special procedure shall follow by the Special Class of Person:

  • Notification No. 11/2020 [Central tax] dated 21/03/2020 is issued prescribing the special procedure for corporate debtors under the provision of Insolvency and Bankruptcy Code (IBC) Code, 2016.
  • As per the provisions of IBC, once an entity defaults certain threshold amount, Corporate Insolvency Resolution Process (hereafter referred to as “CIRP”) gets triggered.
  • After undergoing the corporate insolvency resolution process, the management of that default corporate debtor is undertaken by IRP / RP. (IRP = Interim resolution professional and RP = Resolution professional)
  • “Corporate debtors” under IBC are now special class of person shall follow the following special procedure from the date of appointment of IRP / RP till the corporate insolvency resolution process is over and order passed by NCLT (National Company Law Tribunal).
Subsidy and Liasioning

5 subsidies to start business in Gujarat

Our Honourabe prime minister Shri Narendra Modi has given vision for Make In India, Startup India to boost manufacturing indutries in India to stand at par with developed nations. Government of Gujarat(GoG) since last decade taken numerous initiatives to boost up the Manufacturing industries. GoG give several subsidies and Incentives for such industries.  Lets have a look at 5 subsidies to start business in Gujarat.

1. Assistance of Capital Investment Subsidy:

Who will be eligible?

  • The Enterprise registered as an industrial unit under MSME Development act, 2006 with respective DIC as manufacturing enterprise.
  • Subsidy eligible only for new and existing enterprises going for expansion or diversification. For existing enterprise investment in fixed assets should be more than 50% of total existing fixed assets and such investment should be minimum 60% only in plant and machinery.
  • For carrying out Modernization of existing unit with investment in plant –machinery and equipment by more than 25% of its existing gross fixed capital investment, such modernization should be carried out by way of adopting new technology/ production process and/or improving quality of products.
  • Only one expansion/diversification and one modernization during operative period is eligible to new unit set up during operative period of the scheme. Similarly one expansion/ Diversification and one Modernization during operative period shall be eligible to existing enterprises as on 1st January 2015. THAT MEANS THAT ENTERPRISE CAN CLAIM SUBSIDIES ONLY ONCE IN INDUSTRIAL POLICY, 2015.
  • Old & second hand machinery will not be eligible for assistance.

Applicability of GST on Liquidated Damages

What is liquidated damages (LD)?

Liquidated Damages (LD) is levied or imposed when some specific task or work is not performed as per the agreed terms or condition, means that there is breach of contract terms. LD is generally levied at fixed rated irrespective of actual damages. Generally in large quantum work like infrastructure projects where performance of the contract is very essence of project, then there is specific clause for LD in the contract. Example situation in which LD is levied is like when milestone is not performed within specific time frame then LD is levied at 1% of milestone amount. We will not understand applicability of GST on liquidated damages.