GST Relief for Companies under IBC Process

GST Relief for Companies under IBC Process

The government has taken a decision to allow companies that are undergoing resolution under the Insolvency and Bankruptcy Code (IBC), to pay current levies of goods and services tax (GST) without the mandatory payment of GST past dues. This will help remove an obstacle in the bankruptcy resolution process.

According to senior government officials, the Ministry of Corporate Affairs (MCA) and Department of Revenue (DoR) have begun talks and are likely to roll out a plan soon. “The issue is under discussion… A procedure will be worked out,” said one of them, adding that the officials are expected to meet this week to iron out the details and come to a conclusion.

It is to be noted that the tax authorities are treated on par with operational creditors and are eligible to receive payments with the others. The current framework doesn’t allow a firm to file current tax dues if it has past dues. Penal action has been initiated for non-compliance even in cases where the insolvency resolution process has been initiated or GST registration has been cancelled.

Industry organizations have tried to persuade the government on the issue, asking them to accept current GST dues while giving them a free pass on the previous ones. “There is a need to recognize the fact that there could be several cases of default in GST filings or GST payments due to genuine reasons,” said MS Mani, Partner, Deloitte India. “Such defaults should be condoned, possibly with a small penalty and the focus should be to avoid business disruptions,” he continued.

The Chennai bench of National Company Law Tribunal (NCLT), recently directed revenue authorities to allow corporate debtors to access the GST portal to file taxes after the commencement of insolvency proceedings.


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