GST Implication under IBC Code on Corporate Debtors
GST Implication under IBC on Corporate Debtor

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).

Registration:

  • Special class of persons liable to obtain new GST registration within 30 days from the date of appointment of the IRP / RP because the special class of persons shall be treated as distinct person of the corporate debtors.
  • If IRP / RP already appointed before issuance of notification number 11/2020 [CT] then take registration within 30 days from the date of this notification i.e. 21/03/2020.

Note:

  • Special Class of person = corporate debtor who are undergoing CIRP under the provisions of IBC.
  • Old GST registration of corporate debtor should not be cancelled under the provision of section 29 of CGST Act, 2017.

GST Returns:

  • After obtaining new GST registration, file the first return of special person by IRP /RP under section 40 from the date on which he becomes liable to registration till the date on which registration has been granted.
  • It is important to note that IRP /RP are under obligation to comply with all legal requirements of special person only for the period after the Insolvency commencement date.

Also read: Applicability of GST on Liquidated Damages (LD)

Input Tax Credit:

Input Tax Credit for special class of person under IBC.
Input Tax Credit for special class of person under IBC

 How to claim Refund for amount deposited in the cash ledger in erstwhile registration of corporate debtor by IRP /RP:

  • Amount Eligible for refund = Amount deposited in the cash ledger by IRP /RP in the old (erstwhile) registration of corporate debtor.
  • Refund for which period = Amount deposited from the date of appointment of IRP / RP to the date of notification specifying the special procedure for corporate debtor undergoing CIRP.
  • Refund is eligible to claim even if FORM GSTR-1 / GSTR-3B are not filed for the said period (for erstwhile GSTN of corporate debtor).

So this is the GST Implication under IBC on corporate debtors.

Explanation: For the purpose of this notification, the terms “corporate debtor”, “corporate”, insolvency resolution professional”, “interim resolution professional”, and “resolution professional” shall have the same meaning as assigned to them in the Insolvency and Bankruptcy Code, 2016(31 of 2016). For IBC Code visit here.

For any query author may be contacted on [email protected]

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