RESOLUITION PROFESSIONAL IS TO BE REGISTERED UNDER GST LAWS

[Mr. M. GOVINDARAJAN]

Resolution professional

Every one knows that the Insolvency and Bankruptcy Code, 2016(‘Code’ for short) provides for the initiation of corporate insolvency resolution process against a corporate debtor by a financial creditor or operational creditor or even by the corporate applicant.  The entire corporate insolvency resolution process is handed by insolvency professional. 

Section 5(27) of the Code defines the expression ‘resolution professional’ as  an insolvency professional appointed to conduct the corporate insolvency resolution process and includes an interim resolution professional.

Section 3(19) of the Code defines the expression ‘insolvency professional’ as a person enrolled under section 206 with an insolvency professional agency as its member and registered with the Board as an insolvency professional under section 207.

In the initial stage, the insolvency professional is called as ‘interim resolution professional’ and lately ‘resolution professional’ will occupy the process.

Section13 of the Code provides that the Adjudicating Authority on admission of the application filed for the initiation of corporate insolvency resolution professional, shall appoint interim resolution professional on the insolvency commencement date (with effect from 28.12.2019; before that period the interim resolution professional should be appointed within 14 days from the insolvency commencement date).  The term of the interim resolution professional is 30 days before 06.06.2018.   After 06.06.2018 the term of the interim resolution professional shall continue till the date of appointment of the resolution professional.  In the first meeting of Committee of Creditors the interim resolution professional may be changed.  Even the interim resolution professional may be appointed as resolution professional or a new insolvency professional may be appointed as ‘resolution professional’.  Even the resolution professional may be changed by another resolution professional, if the Committee of Creditors is dissatisfied with the functioning of the resolution professional.

Section 17 of the Code provides that from the date of appointment of the interim resolution professional,-

•  the management of the affairs of the corporate debtor shall vest in the interim resolution professional;
•  the powers of the board of directors or the partners of the corporate debtor, as the case may be, shall stand suspended and be exercised by the interim resolution professional;
• the officers and managers of the corporate debtor shall report to the interim resolution professional and provide access to such documents and records of the corporate debtor as may be required by the interim resolution professional;
• the financial institutions maintaining accounts of the corporate debtor shall act on the instructions of the interim resolution professional in relation to such accounts and furnish all information relating to the corporate debtor available with them to the interim resolution professional.

Thus the entire management of the corporate debtor vests in the interim resolution professional and he is the responsible person for running the business of the corporate debtor as a going concern.

Time limit for completion of insolvency process

The time limit for completion of the corporate insolvency resolution is process is 180 days which may further be extended to another 90 days if it could not be completed within 180 days.  The maximum period allowed to complete the process is 330 days.   If the corporate insolvency resolution process is not completed within the stipulated period the Adjudicating Authority will order for liquidation of the corporate debtor.

Problems faced by IRP/RP

Since the business is conducted by the IRP/RP, the invoices are to be raised.  GST is also to be levied at the rate prescribed for the goods/services and the same is to be remitted to the credit of the Central Government.  Periodical returns are to be filed by the resolution professional.  Many a problem is faced by the professionals. Even some cases the resolution professionals approached the High Courts to get remedy.

Notification by CBIC

To solve the problems faced by the resolution professionals as discussed the Board came with a Notification No. 11/2020-Central Tax, dated 21.03.2020. 

Class of persons

In the Notification the Central Government notified those registered persons who are corporate debtors under the provisions of the Code,  undergoing the corporate insolvency resolution process and the management of whose affairs are being undertaken by interim resolution professionals (IRP) or resolution professionals (RP), as the class of persons who shall follow the following special procedure, from the date of the appointment of the IRP/RP till the period they undergo the corporate insolvency resolution process, as mentioned below.

Registration

The said notification provides that the said class of persons shall, with effect from the date of appointment of IRP / RP, be treated as a distinct person of the corporate debtor, and shall be liable to take a new registration in each of the States or Union territories where the corporate debtor was registered earlier, within thirty days of the appointment of the IRP/RP.  In cases where the IRP/RP has been appointed prior to the date of this notification, he shall take registration within thirty days from the commencement of this notification ,with effect from date of his appointment as IRP/RP.

Return

The said class of persons shall, after obtaining registration file the first return under section 40 of the said Act, from the date on which he becomes liable to registration till the date on which registration has been granted.

Input tax credit

The said class of persons shall, in his first return, be eligible to avail input tax credit on invoices covering the supplies of goods or services or both, received since his appointment as IRP/RP but bearing the GSTIN of the erstwhile registered person, subject to the conditions of Chapter V of the said Act and the rules made there under, except the provisions of sub-section (4) of section 16 of the said Act and sub-rule (4) of rule 36 of the Central Goods and Service Tax Rules, 2017 (hereinafter referred to as the said rules).

Registered persons who are receiving supplies from the said class of persons shall, for the period from the date of appointment of IRP / RP till the date of registration as required in this notification or thirty days from the date of this notification, whichever is earlier, be eligible to avail input tax credit on invoices issued using the GSTIN of the erstwhile registered person, subject to the conditions of Chapter V of the said Act and the rules made there under, except the provisions of sub-rule (4) of rule 36 of the said rules.

Refund

Any amount deposited in the cash ledger by the IRP/RP, in the existing registration, from the date of appointment of IRP/RP to the date of registration in terms of this notification shall be available for refund to the erstwhile registration.