Streamlining Insolvency: A Pathway of Reforms

The Indian Institute of Insolvency Professionals of ICAI recommends comprehensive reforms to streamline the insolvency resolution process. Aligning tax codes with the Insolvency and Bankruptcy Code (IBC), the report advocates tax-neutral treatment for resolution plans and exemption from GST legacy liabilities to revitalize stressed entities.

The Indian Institute of Insolvency Professionals of ICAI has published a report suggesting significant reforms to improve the insolvency resolution process. By aligning the Income Tax Act with the Insolvency and Bankruptcy Code (IBC), the report recommends tax-neutral treatments and exemptions from debt waiver tax liabilities.

To address Goods and Services Tax (GST) issues, the group proposes enabling seamless input tax credit transfers during insolvency and exempting resolution applicants from legacy GST liabilities. The suggestions aim to simplify compliance and encourage revival of financially stressed companies.

Additionally, a new bill introduced in the Lok Sabha on August 12 aims to amend the IBC with changes to expedite insolvency application admissions and implement out-of-court resolutions. The IBC, enforced since 2016, facilitates a market-driven, time-sensitive resolution for distressed assets.

(With inputs from agencies.)