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Resolution Professionals / Liquidators queue up to avail GST Registrations in their own Names at the earliest: MCA & CBIC to Rethink

By Mariya Paliwala -

A recent GST ruling of the West Bengal Authority of Advance Ruling has mandated that a resolution professional since he is selling goods, has to be registered under the GST regime and pay tax thereon.

The authority, in an order issued on an application of M/s Mansi Oils and Grains Pvt Ltd., said that the sale of the assets of the applicant by NCLT appointed liquidator is a supply of goods by the liquidator, who is required to take registration under section 24 of the GST Act.

The section specifies that when goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person.

The company, in this case, Mansi Oils and Grains Pvt. Ltd. has been closed for 10 years before the GST regime came into effect, and hence liquidators were automatically migrated to the GST regime. The liquidator was hence not registered.

The plant and machinery, office equipment, and furniture of the applicant were auctioned as per regulation laid down under section 32 (c) of the IBC at the price Rs. 2.82 crore and all under the GST regime attract different rates.

The Resolution Professionals/Liquidators are insolvency professionals appointed to conduct the corporate insolvency resolution process and include an interim-resolution professional. The applicant company approached the West Bengal AAR so as to seek the ruling on the issue of whether the resolution professional/liquidator was required to be registered under the GST provisions.

In cases where the registration given under earlier laws has lapsed and has not been migrated to GST, the tax authorities can now compel the seller or person authorized to sell, to now obtain registration.

“If she is already registered as a distinct person of the corporate debtor in terms of Notification No. 11/2020 – Central Tax dated 21/03/2020, she should continue to remain registered till her liability ceases under section 29 (1) (c) of the GST Act,” the AAR said.

Experts criticized the ruling on the grounds that every liquidator of an unregistered enterprise would need a GST registration irrespective of the underlying exemption for supplies made by the corporate debtor and his threshold turnover.

“This ruling is nothing more than an absurd technical interpretation of a fiscal law which is still in nascent stages after three years of implementation,” said Rajat Mohan, senior partner at AMRG Associates.

 “It is essential to note that the registration of the Insolvency Professional (IP) as a liquidator of assets, makes it necessary for the IP to be responsible for all the compliances mandated by the GST legislation,“ MS Mani, a tax partner at Deloitte said.

Since 2 GST registration is prohibited so the RP cannot obtain a new  GST registration in her name for any other business.

It can be concluded that it is not just that a GST registration would be the only compliance or paperwork that a resolution professional will have to do rather A GST Registration comes with a lot of tax compliance responsibilities.