Under India's Insolvency and Bankruptcy Code, 2016 (IBC), if a company or Limited Liability Partnership (LLP) defaults on a payment exceeding INR 1 crore (a limit increased due to the COVID-19 pandemic from INR 1 lakh), creditors can initiate the Corporate Insolvency Resolution Process (CIRP). The defaulting entity is then known as a 'corporate debtor,' and its asset management is handed over to an Interim Resolution Professional (IRP) or Resolution Professional (RP). During CIRP, the corporate debtor must fulfill all Goods and Services Tax (GST) obligations, including filing returns and paying taxes. The IRP/RP is required to obtain a new GST registration within 30 days of their appointment. The Central Board of Indirect Taxes and Customs (CBIC) outlined these procedures in CGST notification no. 11/2020, dated March 23, 2020, with further clarifications provided in CGST circular no. 134/04/2020-GST.

Special Procedure for Corporate Debtors in CIRP

Corporate debtors whose assets are overseen by an IRP or RP during CIRP must adhere to specific procedures. These compliance requirements apply from the IRP/RP's appointment date until the insolvency resolution process concludes.

Obtaining New GST Registration

Upon the IRP/RP's appointment, these entities are considered distinct legal persons for GST purposes. They are therefore mandated to acquire new GST registrations in every state or union territory where they previously held registration.

Filing Returns Under Section 40

These entities must submit their initial return according to Section 40 of the CGST Act. The IRP is responsible for filing necessary returns, like GSTR-3B, for the period commencing from the date the company becomes eligible for new registration until the registration is officially granted.

Claiming Input Tax Credit (ITC)

Entities can claim Input Tax Credit (ITC) for both goods and services on all invoices displaying the previous GSTIN, provided they meet the criteria outlined in Chapter V of the CGST Act. However, two primary restrictions apply:

• Section 16(4): This section limits ITC claims if the taxpayer failed to file GSTR-3B for the tax periods between July 2017 and March 2018 on time.
• Rule 36(4): This rule caps provisional ITC claims at 10%.

Even registered individuals receiving goods from these companies are eligible to claim ITC on invoices featuring the old GSTIN, subject to the conditions in Chapter V of the GST Act.

Applying for Refunds

Amounts placed into the cash ledger under the previous GSTIN by an IRP/RP are eligible for a refund. This applies from the IRP's appointment date until the notification establishing specific procedures for corporate debtors in insolvency. Refunds are permissible even if GSTR-3B/GSTR-1 returns for that period have not been submitted.

Frequently Asked Questions Regarding Special Procedures for Corporate Debtors in CIRP

How are GST liabilities from the pre-CIRP period managed?

All GST obligations predating the CIRP commencement are categorized as operational debt. The relevant tax officer can lodge a claim for these amounts with the National Company Law Tribunal (NCLT) in accordance with IBC provisions. Before submitting a claim, tax authorities must confirm all details of supplies made or received and associated tax liabilities.

Is cancellation of the corporate debtor's GST registration required?

While an entity undergoing CIRP must secure a new GST registration, its prior registration does not necessarily need to be canceled. The appropriate officer retains the authority to suspend the old registration if deemed necessary.

Do IRPs/RPs need to file returns for the pre-CIRP period?

IRPs/RPs are responsible for legal compliance only for the period commencing after the CIRP has begun. Consequently, they are not obligated to file returns for any period prior to the initiation of the insolvency process.

How can ITC be claimed for invoices issued to the former registered entity if the IRP/RP was appointed before the notification's issuance?

These individuals must file their initial return under Section 40. They can claim ITC on such supplies, provided they meet the conditions stipulated in Chapter V of the CGST Act and its associated rules.

Is it possible to claim ITC on purchase invoices from a corporate debtor undergoing CIRP, where the IRP/RP was appointed before the notification?

A registered individual who receives supplies from such corporate debtors is entitled to claim ITC on invoices that bear the previous GSTIN. This claim is subject to the conditions outlined in Chapter V of the CGST Act and applies to the period from the IRP/RP's appointment date until either a new registration is obtained or within 30 days of the notification's issuance, whichever occurs sooner.