Sunday 22 November 2020

Kiran Global Chem Ltd. Vs The Asst. Commissioner (ST) - GST Registration of CD under insolvency.

NCLT Chennai (05.12.2019) In T. R. Ravichandran, RP For Kiran Global Chem Ltd.  Vs The Asst. Commissioner (ST) Kilpauk Assessment Circle & 12 Ors [MA/1298/2019 In IBA/130/ 2019] directed all the Respondents (GST Authorities)  including the 13th Respondent to allow the Corporate Debtor to have  access to its GST Net Portal Account, permit the applicant to file GST  Returns of the Corporate Debtor generated after commencement of  CIRP without insisting upon payment of past dues of GST during the  pre-admission period and accept net GST liability after availing  eligible ITC from the date of commencement of CIRP and adjust such  GST payment so remitted by the Corporate Debtor towards  discharge of GST during the CIRP period.

Excerpts of the order;

Order dictated in Open Court on 28.11.2019 

It is an MA filed by Resolution Professional of M/s. Kiran Global  Chem Limited seeking permission to the Corporate Debtor to have  access to its GST Portal Account to file GST Returns during the period  of CIRP and to allow the Applicant to pay the net GST liability from  the date of commencement of CIRP till its completion disregarding  non-payment of arrears dues of GST for the period prior to  commencement of CIRP. 


# 2. Counsel appearing on behalf of 1st Respondent (The Assistant  Commissioner (ST), Anna Nagar East, Chennai) stated that the above  reliefs cannot be granted because no provision has been set out in  GST Act to accept current dues before clearing past dues, therefore  this application is liable to be dismissed. 


# 3. On hearing the above submissions of Applicant as well as the  1st Respondent Counsel, it appears that any company once it has gone  into CIRP, if at all the Corporate Debtor is to be run as a going  concern, it can be obligated to pay the taxes from the date of initiation  of CIRP. As to the dues of pre-admission period, the creditors,  including Tax authorities, are entitled to make a claim against the  Corporate Debtor as mentioned in the Insolvency and Bankruptcy  Code. 


# 4. In view thereof, if the Corporate Debtor's GST Portal is  blocked, it is difficult to the Corporate Debtor to generate bills falling  within the ambit of GST and pay the taxes for the post-admission  period. 


# 5. Since law is clear that Tax authorities fall within the ambit of  the Operational Creditor, as to the pre-admission claims are  concerned, they are at liberty to make their claims before the  Resolution Professional instead of insisting upon the Resolution  Professional to pay the pre-admission dues before accepting the tax liabilities arising during the CIRP period. 


# 6. As to provisions of GST Act, since Section 238 of the  Insolvency and Bankruptcy Code having categorically mentioned  that IBC will have over riding effect on all other laws which are in contravention to the provisions of the IBC, R1 cannot raise an  objection saying since no provision has been made in GST or in its  software to accept such accounts, the business happening in the  market after initiation of CIRP through debtor company will come to  stand still and in such situation no company under CIRP can function  as a going concern. 


# 7. In view thereof, we hereby direct all the Respondents  including the 13th Respondent to allow the Corporate Debtor to have  access to its GST Net Portal Account, permit the applicant to file GST  Returns of the Corporate Debtor generated after commencement of  CIRP without insisting upon payment of past dues of GST during the  pre-admission period and accept net GST liability after availing  eligible ITC from the date of commencement of CIRP and adjust such  GST payment so remitted by the Corporate Debtor towards  discharge of GST during the CIRP period. 


# 8. Accordingly, this MA/1298/2019 is hereby disposed of. 


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Author’s comments; Government, on the recommendations of the Council, notified the procedure for registration for GST of Corporate Debtor undergoing insolvency.


NOTIFICATION

New Delhi, the 21st March, 2020

No. 11/2020–Central Tax

G.S.R. 194(E).—In exercise of the powers conferred by section 148 of the Central Goods and Services Tax Act, 2017 (12 of 2017) (hereinafter referred to as the said Act), the Government, on the recommendations of the Council, hereby notifies those registered persons (hereinafter referred to as the erstwhile registered person), who are corporate debtors under the provisions of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), undergoing the corporate insolvency resolution process and the management of whose affairs are being undertaken by interim resolution professionals (IRP) or resolution professionals (RP), as the class of persons who shall follow the following special procedure, from the date of the appointment of the IRP/RP till the period they undergo the corporate insolvency resolution process, as mentioned below.

2. Registration.- The said class of persons shall, with effect from the date of appointment of IRP / RP, be treated as a distinct person of the corporate debtor, and shall be liable to take a new registration (hereinafter referred to as the 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:

Provided that in cases where the IRP/RP has been appointed prior to the date of this notification, he shall take registration within thirty days from the commencement of this notification, with effect from date of his appointment as IRP/RP.

3. Return.- The said class of persons 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 onwhich registration has been granted.

4. Input tax credit.-

  • (1)The said class of persons shall, in his first return, 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 said Act and the rules made thereunder, except 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 (hereinafter referred to as the said rules).

  • (2) 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.

(5) 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 registration in terms of this notification shall be available for refund to the erstwhile registration.

Explanation.- For the purposes 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).


[F. No. 20/06/03/2020-GST]

PRAMOD KUMAR, Director


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The sole purpose of this post is to create awareness on the "IBC - Case Law" and to provide synopsis of the concerned case law, must not be used as a guide for taking or recommending any action or decision. A reader must refer to the full citation of the order & do one's own research and seek professional advice if he intends to take any action or decision in the matters covered in this post.