Essential Guidelines by Delhi GST Dept for Refunds Under GST & DVAT

The Delhi GST Department, in its Instructions (vide F. No.3(523)/GST/POLICY/2024/1543-51 dated May 22, 2024), has outlined measures to safeguard government revenue during the issuance of refunds under the GST and DVAT Act.

The Insolvency and Bankruptcy Code (IBC), 2016, was established to streamline and amend laws related to reorganization and insolvency resolution, aiming to maximize asset value, promote entrepreneurship, ensure credit availability, and balance stakeholder interests. IBC recognizes three types of creditors: Financial Creditors, Operational Creditors, and Other Creditors, with government dues categorized as “Operational Credit.” Claims for these dues must be filed with the Insolvency Resolution Professional (IRP) or Liquidator, as appropriate.

It has been observed that Proper Officers have been sanctioning refunds under the DVAT Act and GST Act without verifying the status of any ongoing or concluded insolvency/liquidation proceedings against the Registered Persons, nor the status of pending departmental dues/claims. To protect revenue interests, it is now mandated that before approving any refund under the DVAT Act or GST Act, Proper Officers must verify whether any insolvency/liquidation proceedings are pending or concluded against the Registered Person(s) and ascertain their status.

This status can be checked through the Registered Person(s), the web portals of IBBI, NCLT/NCLAT, or the Law & Judicial Branch of the department. If any such proceedings are identified, they must be reported to the concerned Zonal In-charge for further processing of the refund claim in consultation with the Law & Judicial Branch. Additionally, when sending files for ECS under the DVAT Act, the concerned Ward In-charge must include the following certification:

“In view of Instruction No. ____ dated ____ issued by the Department, it is certified that as of the date, no insolvency/liquidation proceeding is pending/concluded against the Dealer.”