Apportionment of ITC in case of Business Reogranization CA. Satyadev Purohit, dated 5 July, 2020

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The Tax Publishers Apportionment of ITC in case of Business Reogranization CA. Satyadev Purohit The present write-up seeks to make an analytical study of the law and procedure for making transfer of ITC in respect of business reorganisation. 1. Transfer of ITC in case of business reorganization Sub-section (3) of the Central Goods and Services Tax Act, 2017 (in short 'the CGST Act') provides that where there is a change in the constitution of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisions for transfer of liabilities, the said registered person shall be allowed to transfer the input tax credit which remains unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in such manner as may be prescribed. 2. Procedure for transfer of ITC in case of business reorganization The procedure for transfer of ITC in case of business reorganization is prescribed under rule 41 of the Central Goods and Services Tax Rules, 2017 (in short 'CGST Rules') as under :-- (i) A registered person shall, in the event of sale, merger, de-merger, amalgamation, lease or transfer or change in the ownership of business for any reason, furnish the details of sale, merger, de-merger, amalgamation, lease or transfer of business, in FORM GST ITC-02, electronically on the common portal along with a request for transfer of unutilized input tax credit lying in his electronic credit ledger to the transferee. In para 3a(ii) of the Circular No. 133/03/2020-GST, dt. 23-03-2020, it has been clarified that the transferor is required to file Form GST ITC-02 only in those States where both transferor and tranferee are registered. (ii) In the case of demerger, the input tax credit shall be apportioned in the ratio of the value of assets of the new units as specified in the demerger scheme. For the purpose of the above, the value of assets means the value of the entire assets of the business, whether or not input tax credit has been availed thereon. (iii) The transferor shall also submit a copy of a certificate issued by a practicing chartered accountant or cost accountant certifying that the sale, merger, de-merger, amalgamation, lease or transfer of business has been done with a specific provision for the transfer of liabilities. (iv) The transferee shall, on the common portal, accept the details so furnished by the transferor and, upon such acceptance, the un-utilized credit specified in FORM GST ITC-02 shall be credited to his electronic credit ledger. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Apportionment of ITC in case of Business Reogranization

CA. Satyadev Purohit

The present write-up seeks to make an analytical study of the law and procedure for making transfer of ITC in respect of business reorganisation.

1. Transfer of ITC in case of business reorganization

Sub-section (3) of the Central Goods and Services Tax Act, 2017 (in short 'the CGST Act') provides that where there is a change in the constitution of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisions for transfer of liabilities, the said registered person shall be allowed to transfer the input tax credit which remains unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in such manner as may be prescribed.

2. Procedure for transfer of ITC in case of business reorganization

The procedure for transfer of ITC in case of business reorganization is prescribed under rule 41 of the Central Goods and Services Tax Rules, 2017 (in short 'CGST Rules') as under :--

(i) A registered person shall, in the event of sale, merger, de-merger, amalgamation, lease or transfer or change in the ownership of business for any reason, furnish the details of sale, merger, de-merger, amalgamation, lease or transfer of business, in FORM GST ITC-02, electronically on the common portal along with a request for transfer of unutilized input tax credit lying in his electronic credit ledger to the transferee. In para 3a(ii) of the Circular No. 133/03/2020-GST, dt. 23-03-2020, it has been clarified that the transferor is required to file Form GST ITC-02 only in those States where both transferor and tranferee are registered.

(ii) In the case of demerger, the input tax credit shall be apportioned in the ratio of the value of assets of the new units as specified in the demerger scheme. For the purpose of the above, the value of assets means the value of the entire assets of the business, whether or not input tax credit has been availed thereon.

(iii) The transferor shall also submit a copy of a certificate issued by a practicing chartered accountant or cost accountant certifying that the sale, merger, de-merger, amalgamation, lease or transfer of business has been done with a specific provision for the transfer of liabilities.

(iv) The transferee shall, on the common portal, accept the details so furnished by the transferor and, upon such acceptance, the un-utilized credit specified in FORM GST ITC-02 shall be credited to his electronic credit ledger.