Government of India has not conducted an assessment of the impact of the Insolvency and Bankruptcy Code (IBC) on tax revenue loss. Under Section 53 of the IBC, government dues, including indirect taxes collected from consumers, rank lower than secured creditors, workmen, employees, and unsecured financial creditors during insolvency proceedings. Although indirect taxes paid by consumers should ideally be part of the Consolidated Fund of India, there is no current proposal to amend the IBC to give higher priority to such taxes. Additionally, the government does not collect or maintain data on total tax revenue forgone due to insolvency cases, as there is no provision for tax waivers under the IBC law.
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
LOK SABHA
UNSTARRED QUESTION NO. 149
ANSWERED ON MONDAY, FEBRUARY 03, 2025
IMPACT OF IBC FRAMEWORK ON LOSS OF TAX REVENUE
QUESTION
149. MS IQRA CHOUDHARY:
SHRI SHYAMKUMAR DAULAT BARVE:
Will the Minister of CORPORATE AFFAIRS be pleased to state:
(a) whether the Government has undertaken any assessment to evaluate the impact of the current Insolvency and Bankruptcy Code (IBC) framework on the loss of tax revenue;
(b) whether the Government is aware that under section 53 of the IBC, Government dues including indirect taxes collected from consumers have very low priority during insolvency processes;
(c) whether the Government is aware that such indirect taxes paid by consumers to businesses must become a part of the Consolidated Fund of India;
(d) whether the Government is considering any amendments to the IBC to ensure that taxes passed on to the consumers are given higher priority; and
(e) whether the Government collects data on the amount of total tax revenue forgone and the proportion of indirect tax therein on account of tax waivers given under IBC law?
ANSWER
MINISTER OF STATE IN THE MINISTRY OF CORPORATE AFFAIRS AND MINISTER OF STATE IN THE MINISTRY OF ROAD TRANSPORT AND HIGHWAYS
[HARSH MALHOTRA]
(a): No such assessment has been undertaken by the Government.
(b) & (c): As per Section 53 of the Insolvency and Bankruptcy Code, 2016, Government dues are positioned below the dues pertaining to secured creditors, workmen, employees, and unsecured financial creditors.
(d) No such proposal, as of now, is under consideration of the Government.
(e) No such data is collected/maintained by the Government as there is no provision of tax waivers under IBC law.
