Circular No. 134/04/2020-GST [C10-4PG]

Various representations have been received from the trade and industry seeking clarification on issues being faced by entities covered under Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “IBC”).

2. As per IBC, once an entity defaults certain threshold amount, Corporate Insolvency Resolution Process (hereafter referred to as “CIRP”) gets triggered and the management of such entity (Corporate Debtor) and its assets vest with an interim resolution professional (hereafter referred to as “IRP”) or resolution professional (hereafter referred to as “RP”). It continues to run the business and operations of the said entity as a going concern till the insolvency proceeding is over and an order is passed by the National Company Law Tribunal (hereinafter referred to as the “NCLT”)

3. To address the aforementioned problems, notification No.11/2020- Central Tax, dated 21.03.2020 has been issued by the Government prescribing special procedure under section 148 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the “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 IRP/RP. In order to ensure uniformity in the implementation of the provisions of the law across the field formations, the

Circular No.134/04/2020-GST

Board, in exercise of its powers conferred under section 168(1) of the CGST Act hereby clarifies various issues in the table below:-

S.No. Issue Clarification

1. How are dues under GST for In accordance with the provisions of the IBC pre-CIRP period be dealt? 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 / received and total tax dues pending from the corporate debtor to file the claim before the NCLT.

Moreover, 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.

2. Should the GST registration It is clarified that the GST registration of an of corporate debtor be entity for which CIRP has been initiated should cancelled? not be cancelled under the provisions of section

29 of the CGST Act, 2017. The proper officer may, if need be, 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

Circular No.134/04/2020-GST

may be revoked by taking appropriate steps in this regard.

3. Is IRP/RP liable to file returns No. In accordance with the provisions of IBC, of pre-CIRP period? 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.

During CIRP period

4. Should a new registration be The corporate debtor who is undergoing CIRP is taken by the corporate debtor to be treated as a distinct person of the corporate during the CIRP period? debtor and 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. Further, in cases where the IRP/RP has been appointed prior to the issuance of notification No.11/2020- Central Tax, dated 21.03.2020, he shall take registration within thirty days of issuance of the said notification, with effect from date of his appointment as IRP/RP.

5. How to file First Return after The IRP/RP will be liable to furnish returns, obtaining new registration? make payment 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.

Circular No.134/04/2020-GST

6. How to avail ITC for invoices The special procedure issued under section 148 issued to the erstwhile of the CGST Act has provided the manner of registered person in case the availment of ITC while furnishing the first IRP/RP has been appointed return under section 40. before issuance of notification The said class of persons shall, in his first return, No.11/2020- Central Tax, be eligible to avail input tax credit on invoices dated 21.03.2020 and no covering the supplies of goods or services or return has been filed by the both, received since appointment as IRP/RP and IRP during the CIRP ? 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 rule made thereunder, except the provisions of sub-section (4) of section 16 of the CGST Act and sub-rule (4) of rule 36 of the CGST Rules. In terms of the special procedure under section 148 of the CGST Act issued vide notification No.11/2020- Central Tax, dated 21.03.2020. This exception is made only for the first return filed under section 40 of the CGST Act.

7. How to avail ITC for invoices Registered persons who are receiving supplies by persons who are availing from the said class of persons shall, for the supplies from the corporate period from the date of appointment of IRP / RP debtors undergoing CIRP, in till the date of registration as required in this cases where the IRP/RP was notification or 30 days from the date of this appointed before the issuance notification, whichever is earlier, be eligible to of the notification No.11/2020 avail input tax credit on invoices issued using - Central Tax, dated the GSTIN of the erstwhile registered person, 21.03.2020? 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.

Circular No.134/04/2020-GST

8. Some of the IRP/RPs have Any amount deposited in the cash ledger by the made deposit in the cash IRP/RP, in the existing registration, from the ledger of erstwhile date of appointment of IRP / RP to the date of registration of the corporate notification specifying the special procedure for debtor. How to claim refund corporate debtors undergoing CIRP, shall be for amount deposited in the available for refund to the erstwhile registration cash ledger by the IRP/RP? 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.

4. It is requested that suitable trade notices may be issued to publicize the contents of this circular.

5. Difficulty, if any, in the implementation of the above instructions may please be brought to the notice of the Board. Hindi version would follow.