This clarifies how field officers could go about dealing with tax dues, which are classified as operational credit under the Insolvency and Bankruptcy Code (IBC).

In an order issued on Tuesday, which is based on a decision by the Goods and Services Tax (GST) Council earlier this month, the CBIC clarified to tax officers that the NCLT and its appellate body are adjudicating authorities for bankruptcy proceedings which also cover government dues.

Therefore, the reduction in the dues to the government as a result of bankruptcy proceedings gets sanctity under GST law too.

As the proceedings under the IBC also adjudicate government dues pending under the Central GST Act or under existing laws against the corporate debtor, the same appears to be covered under the term 'other proceedings' in section 84 of the CGST Act dealing with a reduction in dues payable, the tax authority clarified in a communication addressed to senior field officers.

Tax officers have to inform the taxpayer of such a reduction in the tax payable and proceed with the recovery.

Experts said that over a period of five years, GST laws had been pruned in accordance with other laws to make it a more workable business law.

This long-awaited clarification has now resolved the critical issue that every corporate debtor grapples with on the completion of the corporate insolvency resolution plan, said Rajat Mohan, partner at AMRG Associates, an accounting firm."Commissioner GST has been authorized to reduce tax demands on the finalization of IBC proceedings in respect of the corporate debtor. This clarification will ease the corporate insolvency process and deter tax officers from pursuing fictitious tax demands," said Mohan.Under the bankruptcy code, secured creditors and workmen whose wages are due to have a higher right on the proceeds of liquidation over that of operational creditors.

Separately, the CBIC also issued an order clarifying how home buyers and long-term insurance buyers who cancel their purchases could claim a refund of the taxes they have paid. Such taxpayers will have to take a temporary GST registration on the GST portal using their permanent account number (PAN) and specify the state where the builder or insurance seller is registered. The taxpayer also has to undergo Aadhaar authentication and give bank account details to get the refund, said a CBIC circular.