Transfer of Input Tax Credit (GST) in case of Business Restructuring

Transfer of Input Tax Credit (GST) in case of Business Restructuring

Sometimes there will be changes in the constitution of business of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of business. In such cases, the registered person can transfer the unutilized ITC to the successor. To transfer the ITC, the registered person has to obtain a certificate from a Chartered Accountant or Cost Accountant and furnish Form GST ITC-02 or ITC-02A on the GST portal. Section 18(3) of the CGST Act, 2017 deals with such situations.

Transfer of ITC – Steps to be followed: –

1. Proper intimation to the GST Department

The changes in the constitution of business of a registered person covered are changes due to sale, merger, demerger, amalgamation, lease, transfer or any change in the ownership of a business. In such cases, the registered person shall furnish the details of such change on GST common portal in Form GST ITC-02. Along with this form, a request to transfer the unutilized input tax credit available in his electronic credit ledger to the account of the Transferee is also to be filed.

If it is a demerger, the ITC shall be apportioned in the ratio of the value of assets of the new units as specified in the demerger scheme.

2. Submission of certificate from Practising Professional

The transferor shall also be required to submit a copy of a certificate issued by a practising Chartered Accountant or Cost Accountant. The practising professional should certify that the sale, merger, demerger, amalgamation, lease or transfer of business has been made with a specific provision for transfer of liabilities.

3. Acceptance of ITC by the Transferee

The Transferee shall accept the details furnished by the Transferor on the common portal of GST. Once it is accepted, the unutilized credit as specified in Form GST ITC-02 shall be credited to the electronic credit ledger of the Transferee. The inputs and capital goods so transferred by the transferor shall be duly recorded by the Transferee in his books of account.

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Author – CA. Krishna Kumar FCA

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