MUMBAI: Several companies in administration have dragged the indirect tax department to court over the Goods and Services Tax (GST) software, which they say doesn’t give them the required flexibility on payment of statutory dues.
Several companies on Tuesday filed a writ petition with the Gujarat High Court claiming that the indirect tax department’s position on the GST is not in line with the regulations of the Insolvency and bankruptcy code (IBC).
Many bankrupt companies are complaining that the GST software doesn’t allow them to pay current or future taxes without clearing dues from earlier years. But under IBC, the tax department has to wait until all creditors get their dues before beginning recovery.
ET had on September 12 written that companies are planning to take the indirect tax department to court over the issue.
Appearing for the companies, Khaitan & Co partner Abhishek A Rastogi said that there is a moratorium under IBC that basically means companies don’t have to clear past taxes after they file for bankruptcy.
In several cases, the direct tax department has not been able to claim past taxes from companies admitted into the resolution process. Tax demands as high as several hundred crores of rupees related to income tax or transfer-pricing adjustments have been put on hold.
On the other hand, GST has to be paid by the end consumer and no goods or services can be sold with out paying the tax.
Experts said that many lenders are also concerned that when they are required to take a haircut, the indirect tax department may be having an undue upper hand.
They also said that the IBC is overarching and takes precedence over all other demands from tax departments or any other creditors.
Source : Financial Express