GST Council likely to specify rules and process for registration, return filing by firms in NCLT (TLI Exclusive)

The Council is likely to approve a draft notification in this regard stipulating various procedures for entities being in bankruptcy court following defaults to their financial and operational creditors.
Nirmala Sitharaman

TLI Staff

New Delhi: The GST Council chaired by Finance Minister Nirmala Sitharaman could decide the process of registration, filing of returns and statement for outward supplies among others by companies facing bankruptcy proceedings.

In its 39the meeting on Saturday, the Council is likely to approve a draft notification in this regard stipulating various procedures for entities being in bankruptcy court following defaults to their financial and operational creditors.

A circular is likely to be issued clarifying issues related to bankrupt firms going through insolvency proceedings under Insolvency and Bankruptcy Code, 2016. The Law Committee of the GST Council has already approved the drafts of both the notification and the circular.

At present, corporate debtors being administered by Resolution Professional (RP) face many challenges pertaining to filing of returns. There are difficulties in claiming of credit by the recipient who received supplies from such corporate debtors.

The GST authorities face challenge in raising demands pertaining prior to insolvency commencement date.

National Company Law Tribunal (NCLT), the bankruptcy court, in the case of Axis Bank versus Prius Commercial Projects Pvt Ltd had stated that GST authorities should not take any coercive action against corporate debtor with respect to dues for period prior to insolvency commencement date.

The court also said that the GST authorities should allow the RP to deposit the GST dues for the Corporate Insolvency Resolution Process (CIRP) period and allow filing of returns so that appropriate GST credit can be passed onto the customers of the corporate debtor.

A GST official said that recovery of dues or compliance in the post CIRP period is carried out as per the directions of the NCLT.

Official sources said that the proposed notification and circular would address these issues helping the revenue department recover its tax dues from companies facing proceedings under the bankruptcy law IBC.

As many as 20,000 cases are currently pending with NCLT benches which include about 11,000 cases under IBC, 2016. Some of these cases pertain to big corporates involving huge GST revenue.

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