Subject. Clarification in respect of issues under GST law for companies under Insolvency and Bankruptcy Code, 2016 - Reg.
Various representations have been received from the trade and industry seeking clarification on issues being faced by entities covered under Insolvency and Bankruptcy Code, 2016 (Central Act 31 of 2016) (hereinafter referred to as the "IBC").
2. As per IBC, once an entity defaults certain threshold amount. Corporate Insolvency Resolution Process (hereinafter referred to as "CIRP") gets triggered and the management of such entity (Corporate Debtor) and its assets vest with an interim resolution professional (hereinafter referred to as "IRP") or resolution professional (hereinafter referred to as "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 National Company Law Tribunal (hereinafter referred to as the "NCLT")
3. To address the aforementioned problems, Notification (05/2020) No. FD 03 CSL 2020, dated 27.03.2020 has been issued by the Government prescribing special procedure under section 148 of the Karnataka Goods and Services Tax Act, 2017 (hereinafter referred to as the KGST Act ) for the corporate debtors who are undergoing CIRP under the provisions of IBC and the management of whose affairs are being undertaken by IRP/RP. In order to ensure uniformity in the implementation of the provisions of the law across the field formations, in exercise of powers conferred under section 168(1) of the KGST Act, various issues are hereby clarified in the table below:-
Moreover, section 14 of the IBC mandates the imposition of a moratorium period, wherein the institution of suits or continuation of pending suits or proceedings against the corporate debtor is prohibited.
The instructions contained in Circular No. No.GST-30/2019-20 dated 02.12.2019 stand modified to this extent.
4. Difficulty, if any, in implementation of the Circular may be brought to the notice of this office.
(SRIKAR M.S.)
Commissioner of Commercial Taxes
(Karnataka) Bengaluru