Compliance to be followed by Resolution Professional Under GST
According to Insolvency and Bankruptcy Code (IBC), 2016, once a business defaults certain threshold amount, Corporate Insolvency Resolution Process or CIRP gets triggered and the management of such entity which is done by Corporate Debtor and its assets vest with an interim resolution professional or IRP or resolution professional RP. Resolution Professional under GST continues to run the business and operations of the said organisation as a going concern till the insolvency proceeding is over and an order is passed by the National Company Law Tribunal or NCLT.
Notification No.11/2020- Central Tax, dated 21.03.2020 has been issued by the Government prescribing a special procedure under section 148 of the Central Goods and Services Tax Act, 2017 (CGST Act) for the corporate debtors who are undergoing CIRP under the provisions of IBC and the management of whose affairs are being undertaken by Insolvency Resolution Professional or Resolution Professionals under GST.
The corporate debtor undergoing Corporate Insolvency Resolution Process (CIRP) undergoing CIRP and the management whose affairs are being done by IRP or RP shall follow a special procedure from the date of appointment of the IRP or RP till they undergo the CIRP. Compliance is to be followed by resolution professionals under GST as prescribed in the CGST Act.
What are the Key Changes Made in this Notification for Resolution Professional Under GST?
New registration within 30 days
The corporate debtors undergoing CIRP shall, with effect from the date of appointment of IRP / RP must be treated as a distinct person. The corporate debtor shall be liable to take a new registration in each of the States or Union territories where the corporate debtor was registered earlier, within thirty days of the appointment of the IRP/RP. The resolution professional under GST will undertake powers from the corporate debtor, and then the corporate debtor needs to get a new registration done.
For Ongoing CIRPs
In cases where the IRP/RP has been appointed before the date of this notification, he shall take registration within thirty days from the commencement of this notification, with effect from the date of his appointment as IRP/RP. The resolution professional under GST will have to get the registration done within 30 days.
GST registration of corporate debtor
Central Board of Excise and Customs (CBEC) has clarified that the GST registration of an organization for which CIRP has been initiated should not be canceled under the provisions of section 29 of the CGST Act, 2017.
The proper officer can suspend the registration. In case the GST registration of an entity undergoing CIRP has already been canceled, and it comes 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.
The Resolution professionals under GST shall, after obtaining registration, file the first return under section 40 of the said Act – from the date on which he becomes liable to registration till the date on which registration has been granted.
Resolution Professionals under GST are liable to file returns of pre-CIRP period
The resolution professionals under GST, as per the provisions of IBC, 2016, the IRP/RP is under an obligation to comply with all legal requirements for a period after the Insolvency Commencement Date. Hence, CBEC has issued a clarification that IRP or RP are not under an obligation to file returns of the pre-CIRP period.
Process of filing First Return after obtaining a new registration
The Resolution Professional under GST will be liable to do the following duties:
- Furnish returns,
- Pay tax,
- Comply with the provisions of the GST law during the CIRP period.
- The IRP/RP must 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 GST registration has been granted.
Input tax credit or ITC
ITC by undergoing CIRP Corporate Debtor
The RP or IRP in his first return will be eligible to avail input tax credit on invoices covering the supplies of goods or services or both, received since his appointment as IRP/RP but bearing the GSTIN of the erstwhile registered person, subject to the conditions of Chapter V of the CGST Act and the rules made thereunder, except for the provisions of sub-section (4) of section 16 of the said Act and sub-rule (4) of rule 36 of the Central Goods and Service Tax Rules, 2017.
The special procedure prescribed under section 148 of the CGST Act has provided the manner of availment of ITC while furnishing the first return under section 40.
ITC by Customer of undergoing CIRP Corporate Debtor
Registered persons receiving supplies from the IRP or RP 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.
Registered persons 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 30 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 CGST Act and rule made thereunder, except the provisions of sub-rule (4) of rule 36 of the CGST Rules.
GST Cash Ledger
The amount deposited in the cash ledger by the IRP or RP, in the existing registration, from the date of appointment of IRP/RP to the date of registration in terms of this notification shall be available for refund to the new registration.
Some of the IRP or RPs have deposited in the cash ledger of erstwhile registration of the corporate debtor. 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.
GST dues for period prior to insolvency commencement date
In accordance with the provisions of the IBC and various legal pronouncements on the issue, no coercive action can 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 ‘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 or received and total tax dues pending from the corporate debtor to file the claim before the NCLT. Moreover, section 14 of the IBC manages the imposition of a moratorium period, wherein the institution of suits or continuation of pending suits or proceedings against the corporate debtor is prohibited.
All registered Corporate Debtors under the provisions of Insolvency and Bankruptcy Code, 2016 (IBC), undergoing the process of Corporate Insolvency Resolution Process (CIRP) and the management of whose affairs are controlled by Interim Resolution Professional (IPR) or Resolution Professional (RP) shall follow the special procedure from the date of appointment of IPR/PR till the period they undergo the CIRP. This is introduced according to the GST Council’s decision on 14th March, where the members decided to implement a special procedure for registered persons who are corporate debtors under the provisions of the Insolvency and Bankruptcy Code, 2016 and are undergoing the corporate insolvency resolution process, to enable them to comply with the regulations of GST Laws during the CIRP period.