GST UPDATE - Notification 11/2020 dated 21st March 2020 & Circular 134/04/2020 dt 23rd March 2020 & relating to the Companies Covered under the Insolvency & Bankruptcy Code 2016- Part 1

As per Insolvency and Bankruptcy Code, 2016 (IBC), once an entity defaults certain threshold amount, Corporate Insolvency Resolution Process (CIRP) gets triggered & the management of such entity (Corporate Debtor) and its assets vest with an interim resolution professional (IRP) or resolution professional (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 NCLT.

The CBIC vide Notification No. 11/2020- Central Tax dt 21^st March 2020 has prescribed the special procedures for the corporate debtors under the provisions of IBC, who are undergoing the CIRP and the management of whose affairs are being undertaken by IRP or RP. These special procedures are related to following main areas:-
·         Registration
·         Filing of Returns &
·         Availability of ITC

1. Registration: -New registration has to be taken within 30 days of the appointment of the IRP/RP in respect of said class of persons, in each & every States /UTwhere the corporate debtor was registered earlier since they will be treated as a distinct person of the corporate debtor.
However, where the IRP/RP has been appointed prior to the date of this notification, he shall take registration within 30 days from the commencement of this notification,
This has been done to overcome the ruling of High Court wherein it was held that the units working under this scheme shall be allowed to file returns without filing earlier period returns. Now, since they have to obtain new registration then they need not to file the returns for the earlier period.

2.Filling of Returns: -After obtaining new registration they shall have to file the first returnunder section 40 of the GST Act which states from the date on which he becomes liable to registration till the date on which registration has been granted. As already narrated, these provisions have been brought to implement smoothly the High Court verdict.

3.Availability of ITC: - (A) While filing their first return, said persons shall be eligible to avail ITC on the invoices received since his appointment as IRP/RP but bearing the GSTIN of the erstwhile registered person, bounded by the conditions of Chapter V (rules relating to ITC from Rule 36- Rule 45) except the provisions of sub-section (4) of section 16 of the said Act and sub-rule (4) of rule 36 of the CGST Rules, 2017. Section 16(4) prescribes the time limit of taking of credit and Rule 36(4) prescribes limitation of taking extra credit of 10% of invoices shown in GSTR-2A.

(B) Registered persons who are receiving supplies from the said class of persons shall, be eligible to avail input tax credit on invoices issued using the GSTIN of    the erstwhile registered person 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 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.

A point worth to be noted here is that the time limit for availing the ITC as prescribed by Sec 16(4) shall not be applicable and the newly registered IRP/RP can avail the ITC after the time limit for the month of September or the filing of date of Annual Return too. Moreover, the limitation for the availment of ITC as per Rule 36(4) subject to 20% (now 10%) shall also not be applicable to the said class of persons.

Refund shall also be granted on the 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.

The discussion relating to the Circular No.13 CT dated 23^rd March shall be discussed in the Next Part.
To be continued……

This is solely for educational purpose.
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GST UPDATE - Notification 11/2020 dated 21st March 2020 & Circular 134/04/2020 dt 23rd March 2020 & relating to the Companies Covered under the Insolvency & Bankruptcy Code 2016- Part 1

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