Important Keyword: GST Circular 187/19/2022, IBC GST dues, Section 84 CGST Act, GST after insolvency, GST DRC-25, Insolvency and Bankruptcy Code GST, GST recovery after NCLT, Corporate insolvency GST, Operational debt GST, GST demand reduction under IBC,
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F. No. CBIC-20001/2/2022 - GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
*****
New Delhi, Dated the 27th December, 2022
Circular No. 187/19/2022 - GST: Clarification regarding the treatment of statutory dues under GST law in respect of the taxpayers for whom the proceedings have been finalized under Insolvency and Bankruptcy Code, 2016
To,
The Principal Chief Commissioners / Chief Commissioners / Principal Commissioners / Commissioners of Central Tax (All)
The Principal Directors General / Directors General (All)
Madam/Sir,
Subject: Clarification regarding the treatment of statutory dues under GST law in respect of the taxpayers for whom the proceedings have been finalized under Insolvency and Bankruptcy Code, 2016- reg.
Attention is invited to Circular No.134/04/2020-GST dated 23rd March, 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 Tax Act, 2017 (hereinafter referred to as “Central Goods and Services Tax Act”) as well under the existing laws and the treatment of such statutory dues under Central Goods and Services Tax 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 field formations, the Board, in exercise of its powers conferred under section 168(1) of the Central Goods and Services Tax Act, hereby clarifies as follows.
4.1 Section 84 of Central Goods and Services Tax 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 appeal or revision application is filed or any other proceedings is initiated in respect of such Government dues, then-
..
(b) where such Government dues are reduced in such appeal, revision or in other proceedings-
- it shall not be necessary for the Commissioner to serve upon the taxable person a fresh notice of demand;
- the Commissioner shall give intimation of such reduction to him and to the appropriate authority with whom recovery proceedings is pending;
- 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.”
4.2 As per Section 84 of Central Goods and Services Tax Act, if the government dues against any person under Central Goods and Services Tax Act are reduced as a result of any appeal, revision or other proceedings in respect of such government dues, then an intimation 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.
4.3 The word ‘other proceedings’ is not defined in Central Goods and Services Tax 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 Tax Rules, 2017 prescribes FORM GST DRC-25 for issuing intimation for such reduction of demand specified under section 84 of Central Goods and Services TaxAct.
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 07A against the corporate debtor, and where the proceedings have been finalized against 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-25 reducing 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.
7. Difficulty, if any, in the implementation of the above instructions may please be brought to the notice of the Board. Hindi version would follow.
(Sanjay Mangal)
Principal Commissioner (GST)
📚 Frequently Asked Questions (FAQs): Circular No. 187/19/2022 - GST
Q1. What is Circular No. 187/19/2022-GST about?
Answer: It clarifies how GST demands should be treated after insolvency proceedings under the Insolvency and Bankruptcy Code are finalized. If the approved resolution plan reduces the Government's dues, the GST department must update its records and continue recovery only for the reduced amount.
Q2. Why was this circular required?
Answer: It was issued to remove confusion after the approval of resolution plans under the IBC. Many GST demands continued to appear in full even after the NCLT had reduced the amount payable, leading to unnecessary recovery issues and inconsistencies in GST records.
Q3. What happens to GST dues after the NCLT approves a resolution plan?
Answer: The GST dues become payable only to the extent approved in the resolution plan. The jurisdictional Commissioner should reduce the recorded demand through FORM GST DRC-25, and recovery proceedings should continue only for the revised amount.
Q4. What is the role of Section 84 of the CGST Act?
Answer: Section 84 provides the mechanism for continuing recovery proceedings after Government dues are reduced through appeal, revision, or other proceedings. This circular clarifies that finalized insolvency proceedings under the IBC also fall within the scope of "other proceedings."
Q5. Are insolvency proceedings considered "other proceedings" under GST law?
Answer: Yes. The circular specifically clarifies that proceedings before the NCLT under the Insolvency and Bankruptcy Code are quasi-judicial proceedings and are covered within the expression "other proceedings" used in Section 84 of the CGST Act.
Q6. What is FORM GST DRC-25?
Answer: FORM GST DRC-25 is an intimation issued under Rule 161 of the CGST Rules to formally reduce the outstanding GST demand where Government dues have been reduced through proceedings covered by Section 84, including finalized IBC proceedings.
Q7. Is a fresh demand notice required after the reduction?
Answer: No. Section 84 specifically provides that no fresh demand notice is necessary. Instead, the Commissioner issues DRC-25 informing the taxpayer and the recovery authority about the reduced demand.
Q8. Does this circular benefit only corporate debtors?
Answer: The clarification mainly applies to corporate debtors whose insolvency proceedings have been completed under the Insolvency and Bankruptcy Code. It also provides certainty to resolution professionals, successful bidders, and GST officers handling recovery matters.
Q9. Can the GST department recover more than what is approved under the resolution plan?
Answer: No. Once the statutory dues have been finalized and reduced through the approved resolution plan, recovery should continue only for the revised amount reflected through DRC-25.
Q10. Does this circular change the GST law?
Answer: No. It does not amend the law. Instead, it explains how the existing provisions of Section 84 of the CGST Act should be implemented where insolvency proceedings under the IBC have been finalized.
Q11. What is the significance of DRC-07 and DRC-07A in this context?
Answer: DRC-07 and DRC-07A contain the summary of the confirmed demand. If that demand is later reduced through an approved resolution plan under the IBC, the jurisdictional Commissioner should issue DRC-25 to reflect the revised amount.
Q12. Why is this clarification important for businesses?
Answer: It ensures that GST recovery records align with the approved insolvency resolution plan. This prevents unnecessary recovery actions, reduces litigation, and gives greater certainty to businesses emerging from insolvency and to the stakeholders involved in the resolution process.
Conclusion
In simple terms, Circular No. 187/19/2022 bridges the gap between the Insolvency and Bankruptcy Code and the GST law. Once the NCLT approves a resolution plan, the GST department must recognise the revised statutory dues instead of continuing recovery based on the original demand.
Download PDF: Circular No. 187/19/2022 - GST
More Information: https://taxinformation.cbic.gov.in/
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