Mumbai: Several companies have successfully bid and taken over the operations of a defaulting company. bankruptcy And the Bankruptcy Code (IBC) has been mired in litigation for some time now. GST arrears, notwithstanding that the law provides full protection to them.
Tax experts point out that the Central Board of Indirect Taxes and Customs had issued a circular in December 2022, and tax adjudicating officers were directed to recover only the lesser amount of the liability as per the proceedings relating to the insolvency resolution process. was determined during Further, the existing dues of the defaulting company, which were not part of the approved scheme, stood liquidated.
Bipin SapraIndirect Tax Partner, EY-India said, “Though this circular has directed to put to rest a major chunk of litigation, its implementation on the ground remains a challenge. The jurisdictional GST Commissioners are required to issue Form DRC-25 specifying the amount on which the settlement was reached. However, there are cases where there is reluctance to issue this form in view of the huge volume. He further added, “Tribunals and courts are insisting on submission of DRC-25 to close GST litigation proceedings. The additional issue is that, due to non-issuance of DRC-25, significant amount is stuck as pre-deposit (paid at the stage of filing appeal), which the resulting company is entitled to receive once. irp The proceedings have been completed and the dues have been settled. ,
Issues also arise with regard to input tax credit. Sunil GabwalaThe chartered accountant said: “In most situations, the successful bidder (new company) faces challenges in claiming input tax credit of taxes paid to vendors for the pre-takeover period. ,
Second, there are no provisions to protect the interests of other stakeholders. If the defaulting company had collected the tax and did not pay it to the government, the recovery of the said dues is secured on the part of the defaulting company. However, the customer who has paid tax to the defaulting company does not get any protection and his input tax credit is denied. This results in practical difficulties for the successful bidder to continue the business relationship with the said customer, Gabhwala said.
Tax experts point out that the Central Board of Indirect Taxes and Customs had issued a circular in December 2022, and tax adjudicating officers were directed to recover only the lesser amount of the liability as per the proceedings relating to the insolvency resolution process. was determined during Further, the existing dues of the defaulting company, which were not part of the approved scheme, stood liquidated.
Bipin SapraIndirect Tax Partner, EY-India said, “Though this circular has directed to put to rest a major chunk of litigation, its implementation on the ground remains a challenge. The jurisdictional GST Commissioners are required to issue Form DRC-25 specifying the amount on which the settlement was reached. However, there are cases where there is reluctance to issue this form in view of the huge volume. He further added, “Tribunals and courts are insisting on submission of DRC-25 to close GST litigation proceedings. The additional issue is that, due to non-issuance of DRC-25, significant amount is stuck as pre-deposit (paid at the stage of filing appeal), which the resulting company is entitled to receive once. irp The proceedings have been completed and the dues have been settled. ,
Issues also arise with regard to input tax credit. Sunil GabwalaThe chartered accountant said: “In most situations, the successful bidder (new company) faces challenges in claiming input tax credit of taxes paid to vendors for the pre-takeover period. ,
Second, there are no provisions to protect the interests of other stakeholders. If the defaulting company had collected the tax and did not pay it to the government, the recovery of the said dues is secured on the part of the defaulting company. However, the customer who has paid tax to the defaulting company does not get any protection and his input tax credit is denied. This results in practical difficulties for the successful bidder to continue the business relationship with the said customer, Gabhwala said.