Loss of ITC Due To Corporate Debtor's Default In GST Filing Is Not Operational Debt: NCLT Mumbai

The National Company Law Tribunal at Mumbai has recently held that operational creditors cannot claim GST-related dues arising from a corporate debtor's failure to file returns once the GST department has already lodged its own claim in liquidation.

A coram of Judicial Member Mohan Prasad Tiwari and Technical Member Charanjeet Singh Gulati rejected the appeal filed by Instakart Services Pvt. Ltd in the liquidation of TopsGroup services and Solutions concluding that the claim “cannot be admitted” because the GST liability had already been lodged by the tax authorities.

"Since the GST Department has already filed its claim, which has been duly, there is no justification for the Appellant to file a separate claim before the Liquidator towards the GST liability of the Corporate Debtor."

The tribunal further observed that the responsibility for depositing GST lies squarely with the supplier.

“It is the statutory duty of the supplier to remit to the Government the GST collected from the recipient of goods or services,” the order noted, adding that if there was any default, “it is for the GST Department to pursue recovery or initiate appropriate proceedings or the imposition of penalty.”

Instakart, an operational creditor, had entered into a long-standing service agreement under which the corporate debtor, TopsGrup Services and Solutions Ltd., provided security and guarding services. Instakart alleged that the corporate debtor failed to file or incorrectly filed GSTR returns for several invoices between July 2017 and August 2019, resulting in the denial of Input Tax Credit (ITC) of over Rs 80 lakh.

Instakart claimed it only became aware of the liquidation after the deadline for filing claims and submitted its Form G with an 11-day delay. It argued that the failure to file GSTR-1 meant the GST burden shifted onto it, and that the liquidator ignored repeated follow-ups.

The liquidator opposed the plea, arguing that the claim was incomplete, time-barred, unsupported by mandatory documents, and could not be reopened after stakeholders' lists were finalised. The liquidator pointed out that the GST Department had independently filed its own claim of Rs. 17.69 crore, which had already been admitted.

The tribunal also noted that Instakart had itself acknowledged liability of nearly Rs 41 lakh to the corporate debtor in an email dated June 17, 2021, and that assets of the corporate debtor had since been sold as a going concern.

It also held that the liquidator was justified in rejecting the late claim, observing: “There was a lapse on the part of the Appellant in providing the documents requested by the Liquidator at the time of submitting its claim.”

The tribunal also emphasised that even if the corporate debtor defaulted in filing the returns, the remedy lay with the tax authorities. The tribunal dismissed the appeal, ruling, “the claim filed by the Appellant for Rs. 86,60,659/- towards GST liability arising from the Corporate Debtor's default cannot be admitted.”