This circular provides clarification on the manner of treatment and recovery of statutory dues under the GST law and existing laws in cases where insolvency proceedings against a corporate debtor have been finalised under the Insolvency and Bankruptcy Code, 2016 (IBC).

It reiterates that, as clarified earlier, GST dues pertaining to the period prior to commencement of the Corporate Insolvency Resolution Process (CIRP) are to be treated as operational debt and no coercive recovery action can be taken during the insolvency process. Representations were received seeking clarity on how GST demands are to be dealt with once proceedings under the IBC are concluded and a resolution plan is approved by the adjudicating authority.

The circular clarifies that proceedings under the IBC, conducted by authorities such as the National Company Law Tribunal (NCLT), qualify as “other proceedings” for the purpose of section 84 of the CGST Act. Accordingly, where confirmed GST demands have been reduced or settled pursuant to final orders under the IBC, the reduced amount becomes the legally recoverable government dues.

In such cases, the jurisdictional Commissioner is required to issue an intimation in FORM GST DRC-25, reflecting the reduction in demand. This intimation must be issued to the corporate debtor as well as to the authority where recovery proceedings, if any, are pending. Recovery proceedings may then continue only to the extent of the reduced dues, in accordance with law.

The circular aims to ensure uniform implementation of GST provisions in insolvency-related matters and to align recovery actions with outcomes under the IBC.