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Clarification regarding the treatment of statutory dues under GST law in respect of the taxpayers for whom the proceedings have been finalised under Insolvency and Bankruptcy Code, 2016-reg.

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Central Board of Indirect Taxes and Customs Circular No.  187/19/2022-GST New Delhi, Dated the 27thDecember, 2022

Attention is invited to Circular No.134/04/2020-GST dated 23rdMarch, 2020, wherein it was clarified that no coercive action can be taken against the corporate debtor with respect to  the  dues  of  the  period  prior  to  the  commencement  of  Corporate  Insolvency  Resolution Process(CIRP). Such dues will be treated as ‘operational debt’ and the claims may be filed by the proper officer before the NCLT in accordance with the provisions of the IBC. 2.Representations have been received from the trade as well as tax authorities, seeking clarification  regarding  the  modalities  for  implementation  of  the  order  of  the  adjudicating authority under Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “IBC”) with respect to demand for recovery against such corporate debtor under  Central Goods and Services TaxAct, 2017(hereinafter referred to as “CGST Act”)as well under the existing laws and the treatment of such statutory dues under CGST Act and existing laws, after finalization of the proceedings under IBC.3.In order to ensure uniformity in the implementation of the provisions of the law across the fieldformations, the Board, in exercise of its powers conferred under section 168(1) of the CGST Act,hereby clarifies as follows.4.1Section 84 of CGST Act reads as follows:“Section 84 -Continuation and validation of certain recovery proceedings.-Where any notice of demand in respect of any tax, penalty, interest or any other amount  payable  under  this  Act,  (hereafter  in  this  section  referred  to  as  "Government dues"), is served upon any taxable person or any other person and any appealor revision

Page 2of 3application is filed or any other proceedingsis initiated in respect of such Government dues, then-..(b)  where  such  Government  dues  are  reduced  in  such  appeal,  revision  or in  other proceedings-(i)  it  shall  not  be  necessary  for  the  Commissioner  to  serve  upon  the  taxable  person  a fresh notice of demand;(ii)  the  Commissioner  shall  give intimationof  such  reduction  to  him  and  to  the appropriate authority with whom recovery proceedings is pending;(iii) any recovery proceedings initiated on the basis of the demand served upon him prior to the disposal of such appeal, revision or other proceedings may be continued in relation to the amount so reduced from the stage at which such proceedings stood immediately before such disposal.”4.2As per Section 84 of CGST Act, if the government dues against any person under CGST Act  are  reduced  as  a  result  of  any  appeal, revision  or  other  proceedings  in  respect  of  such government dues, then anintimation for such reduction of government dues has to be given by the Commissioner to  such  person  and  to  the  appropriate  authority  with  whom  the  recovery proceedings  are pending. Further,  recovery proceedings can be  continued  in relation to such reduced amount of government dues.4.3The word ‘other proceedings’ is not defined in CGST Act. It is to be mentioned that the adjudicating  authorities  and  appellate  authorities  under  IBC  are  quasi-judicial  authorities constituted to deal with civil disputes pertaining to insolvency and bankruptcy. For instance, under  IBC,  NCLT  serves  as  an  adjudicating  authority  for  insolvency  proceedings  which  are initiated  on  application  from  any  stakeholder  of  the  entity  like  the  firm,  creditors,  debtors, employees  etc.  and  passes  an  order  approving  the  resolution  plan.  As  the  proceedings conducted  under  IBC  also  adjudicate  the  government  dues  pending  under  the  CGST  Act  or under existing laws against the corporate debtor, the same appear to be covered under the term ‘other proceedings’ in Section 84 of CGST Act. 5.Rule  161  of  Central Goods  and Services TaxRules,  2017  prescribes FORM  GST DRC-25for  issuingintimation  for  such  reduction  of  demandspecified  under  section  84  of CGST Act. Accordingly, in cases where a confirmed demand for recovery has been issued by the tax authorities for which a summary has been issued in FORM GST DRC-07/DRC 07Aagainst  the  corporate  debtor,  and  where  the  proceedings  have  been finalisedagainst  the corporate  debtor  under  IBC  reducing  the  amount  of  statutory  dues  payable  by  the  corporate debtor  to  the  government  under  CGST  Act  or  under  existing  laws,  the  jurisdictional Commissioner shall issue an intimation in FORM GST DRC-25reducing such demand, to the taxable person or  any other person as well as the appropriate authority with whom recovery proceedings are pending. 6. It is requested that suitable trade notices may be issued to publicize the contents of this circular.

Page 3of 37. Difficulty, if any, in the implementation of the above instructions may please be brought to the notice of the Board. Hindi version would follow


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