The Goods and Services Tax (GST) Council during its 39th meeting, held on 14 March 2020, decided that a special procedure should be prescribed for corporate debtors undergoing the corporate insolvency resolution process (CIRP) under the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC), in order to enable such entities to comply with the provisions of the GST laws.

Once the CIRP application is admitted, the management of the corporate debtor and its assets vest with a resolution professional (RP), who continues to run the business and operations of the said entity till the conclusion of the CIRP proceedings. Accordingly, to give effect to the said decision of the GST Council, the Central Board of Indirect Taxes and Customs (CBIC) has now issued instructions in the form of Notification No. 11/2020-Central Tax and Circular No. 134/04/2020-GST laying down the modalities to be followed by the corporate debtor/RP.

Notification No. 11/2020 - Central Tax dated 21 March 2020

Special procedures have been notified for corporate debtors the management of whose affairs is being undertaken by an RP, which are to be followed from the date of the appointment of the RP. A gist of these special procedures is provided below:

Registration: The corporate debtor shall, with effect from the date of appointment of RP, be treated as a distinct person of the corporate debtor (Distinct Person) and be liable to take a new registration in each of the States or Union Territories in which the corporate debtor was previously registered, within thirty days of the appointment of the RP.
First return: The said Distinct Persons shall file their first return declaring inter alia, the supplies made or received in the period between the date on which such Distinct Person became liable to registration and the date on which registration was granted.
Input Tax Credit (ITC):
  • ITC on invoices received since the appointment of RP, but bearing the GST Identification Number (GSTIN) of the erstwhile corporate debtor, shall be available to the said Distinct Person, notwithstanding the time limit specified under the GST law for availing such ITC or the fact that such invoices do not appear in Form GSTR-2A of such person.
    The CBIC has clarified that the aforesaid exception has been carved out only for the first return filed by the Distinct Person.
  • Customers of the corporate debtor shall be allowed to avail ITC on invoices issued using the GSTIN of the erstwhile corporate debtor. This shall be applicable for supplies received in the period between the date of appointment of RP and the date of registration of such Distinct Person, notwithstanding the fact that such invoices do not appear in Form GSTR-2A of such customers.
  • Any amount deposited in the cash ledger against the GSTIN of the erstwhile corporate debtor, in the period between the date of appointment of RP and the date of registration of the Distinct Person, shall be available for refund.
    The CBIC has clarified that the above shall apply notwithstanding the fact that the corporate debtor may not have filed the relevant GST returns during the said period.

Circular No. 134/04/2020-GST dated 23 March 2020

The Circular clarifies certain important issues, and states that:

  • No coercive action should be taken against the corporate debtor with respect to the dues pertaining to the pre-CIRP period. Such pre-CIRP dues shall be considered as 'operational debt' and claims may be filed before the National Company Law Tribunal (NCLT) in accordance with the provisions of IBC.
  • The GST registration of the corporate debtor undergoing CIRP should not be cancelled. If such registration has already been cancelled, such order of cancellation must be revoked if the same is within the period of revocation. The revenue authorities have, however, been empowered to suspend the registration in appropriate cases.
  • The RP is not under an obligation to file returns pertaining to the pre-CIRP period. However, the RP shall be liable to furnish returns, make payment of taxes and comply with all other provisions of the GST laws during the CIRP period.


Keeping in view the divergent and seemingly arbitrary practices being followed by various field formations of the CBIC while dealing with corporate debtors undergoing CIRP, the CBIC has done well to intervene and clarify certain open issues. Due to lack of clarity regarding the status of past GST compliances post initiation of CIRP, the revenue authorities in certain cases had cancelled registrations and blocked access to the online GST portal for the companies in default.

The aforesaid special procedure has been announced on the heels of several decisions of the NCLT, such as that of the Chennai bench in the case of T. R. Ravichandran, R. P. (for Kiran Global Chem. Limited) v Assistant Commissioner (ST) & Others (MA/1298/2019 in IBA/130/2019), wherein the NCLT had directed the revenue authorities to permit the corporate debtor to file GST returns and discharge GST from the date of CIRP, without insisting upon payment of past unpaid dues.

Finally, while the CBIC has addressed certain procedural aspects, there is limited clarity as regards various substantive issues including the following:

  • Potential disallowance of ITC in the hands of the corporate debtor on account of its suppliers, being operational creditors, having to take a haircut pursuant to the resolution plan;
  • Potential disallowance of ITC in the hands of the corporate debtor's customers on account of non-payment of GST by the corporate debtor during the pre-CIRP period;
  • Availability of refund of the balance standing to the credit of the corporate debtor's electronic cash and credit ledgers as on the date of initiation of CIRP;
  • Availability of refund of GST, if any, paid by the corporate debtor post initiation of CIRP, using balance available in the electronic cash/credit ledger which the online GST portal has appropriated towards dues of the pre-CIRP period, in light of the fact that claims towards pre-CIRP dues are required to be separately filed by the revenue authorities before the NCLT. The notification referred to above merely provides a clarification regarding amounts "deposited" in the electronic cash ledger but fails to clarify the status of amounts already "paid" by the corporate debtor using such ledger.

KCO is presently representing a corporate debtor in a writ petition filed before the Hon'ble Gujarat High Court on the aforesaid issue.

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