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Companies Under IBC Will Need New GST Registration

Companies under IBC must make fresh GST registration within 30 days of resolution professional being appointed for them.

Bankruptcy and Insolvency Act. Photographer: Ben Nelms/Bloomberg
Bankruptcy and Insolvency Act. Photographer: Ben Nelms/Bloomberg

Companies under Insolvency and Bankruptcy process must avail a fresh GST registration within 30 days of a resolution professional being appointed for them.

If the resolution professionals have already been appointed, GST registration will have to be availed within a month, the government has said.

The new registration will have to obtained in each of the states or union territories the corporate debtor or the stressed company was registered earlier.

The resolution professional, according to a government notification, will have to file GST returns after obtaining registration under Section 40 of the CGST Act till the date on which registration has been granted. The section requires every registered person—who makes sales in the period between the date he becomes liable to registration till the date on which registration has been granted—to declare the same in the first return after receiving the registration.

The government needs to give clarity on the tax filings made by companies that have already been under the insolvency process for some time, said Rajat Mohan, a partner at AMRG & Associates. Mohan said that some companies, that are under IBC would have filed their tax returns for sales made during the insolvency proceedings. If such transactions are reported again by the resolution professional, then it will lead to double taxation on the same entity for the same transaction, Mohan told BloombergQuint.

The resolution professionals, in their first return, will be eligible to avail input tax credit on invoices covering the supplies of goods or services or both, received since their appointment. Registered persons who receive supplies from the company—under resolution—will be eligible to avail input tax credit on invoices issued using the GST registration of the erstwhile registered entity till a fresh registration is availed.

The notification states that any amount deposited in the cash ledger by the resolution professional in the existing GST registration, till the time a new registration is granted, shall be available for refund to the erstwhile registration.

Abhishek Rastogi, a partner at Khaitan & Co., said there’s ambiguity over whether the amount deposited or the balance unutilised amount in the cash ledger will be eligible for refund to the erstwhile GST registration.

The notification has been issued subsequent to a writ petition filed in the Gujarat High Court to challenge the issue which requires payment of taxes for the period prior to the appointment of the resolution professional inspite of the moratorium provisions under IBC, said Rastogi, who is arguing for petitioners.

Relief For Small Businesses

The government has also notified that taxpayers who avail the composition scheme won’t have to file GSTR-1 returns—that contain information of sales made—and CMP-08 form that contains details of payment of self-assessed tax for 2019-20. Composition scheme allows taxpayers to pay a flat GST rate, without the option to avail input tax credit.

The government has also notified Oct. 1, 2020, as the date for implementing quick response code on business to consumer invoices for companies with turnover over Rs 500 crore.