GST for Companies under Insolvency | Special Procedure

Special Procedures notified vide Notification No. 11/2020 – Central Tax Dated March 21st, 2020 and clarified vide Cirular No.134/04/2020-GST – Dated March 23rd, 2020

Class of persons who shall follow the special procedure

Those registered persons(hereinafter referred to as the erstwhile registered person), who are Corporate debtors under the provisions of the Insolvency and Bankruptcy Code (IBC), 2016 undergoing the corporate insolvency resolution process(CIRP) and the management of whose affairs are being undertaken by interim resolution professionals (IRP) or resolution professionals (RP). Hereinafter referred to as said class of person

 

Period for which special procedure has to be followed

From the date of the appointment of the IRP/RP till the period they undergo the corporate insolvency resolution process.

Special procedure

New Registration  (has to be effective from the date of IRP/RP appointment)

 

The said class of person shall be liable to take a new registration in each state or Union Territory where the corporate debtor was registered earlier.

 

New Registration
                     If IRP/RP has not been appointed prior to issuance of Notification No 11/2020 dated 21st March, 2020. Within 30 days from the appointment of IRP/RP
If IRP/RP has been appointed prior to issuance of Notification 11/2020 dated 21st March, 2020. Within 30 days from the issuance of notification.

Distinct person

The corporate debtor who is undergoing CIRP is to be treated as a distinct person of new registration (i.e. notified as said class of person).

Should the GST registration of corporate debtor be cancelled?

No, However if needed proper officer may 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.

Return

IRP/RP is liable for returns, tax payment and comply with provisos of the GST law during CIRP period

Is IRP/RP liable to file returns of pre-CIRP period?

No, In accordance with the provisions of IBC, 2016, the IRP/RP is under obligation to comply with all legal requirements for period after the Insolvency Commencement Date. Accordingly, it is clarified that IRP/RP are not under an obligation to file returns of pre-CIRP Period

First return has to be filed from the date on which he becomes liable to registration till the date on which registration has been granted.

Input Tax Credit

ITC availment for invoices issued to the erstwhile registered person

The said class of person shall in first return, be eligible to avail ITC on invoices received since his appointment as IRP/RP but bearing GSTIN of erstwhile registered person, subject to the conditions of chapter V of the said Act and rules made thereunder, except the provisions of Section 16(4) of the CGST Act, 2017 and Rule 36(4) of the CGST Rules, 2017

This exception is made only for the first return filed under section 40 of the CGST Act.

 

How to avail 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 this notification?

(ITC by recipients of Corporate debtors)

 

Registered persons who are receiving supplies from the said class 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 thirty days from the date of this notification, whichever is earlier, be eligible to avail input tax credit on invoices issued using the GSTIN of the erstwhile registered person, subject to the conditions of Chapter V of the said Act and the rules made thereunder, except the provisions of sub-rule (4) of rule 36 of the said rules.

Refund of Amount deposited in cash ledger by IRP/RP

Some of the IRP/RPs have made deposit in the cash ledger of erstwhile registration of the corporate debtor. How to claim refund for amount deposited in the cash ledger by the IRP/RP?

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

The instructions contained in Circular No. 125/44/2019-GST dt. 18.11.2019 stands modified to this extent.

 

 

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