The Statutory Basis
Section 18(3) of the CGST Act, read with Rule 41, permits the transfer of unutilised ITC in cases of sale, merger, demerger, amalgamation, lease, or transfer of business. The transfer is effected through FORM GST ITC-02, and it requires the transferee to accept the credit in its electronic credit ledger. The liabilities of the transferor must also be transferred.
The NCLT Approval as a Valid Business Transfer
The Kerala Authority for Advance Ruling in Flytxt Mobile Solutions held that an NCLT-approved merger is a valid “transfer of a business” for the purposes of Section 18 of the CGST Act. The ruling confirms that the ITC lying in the transferor’s electronic credit ledger can be transferred to the transferee’s GSTIN, even where the transferor and transferee are in different states.
The Inter-State Transfer Confirmation
The Gujarat High Court has held that unutilised ITC can be transferred across states pursuant to an NCLT-approved amalgamation, and that the CGST Act does not impose a restriction that the transferor and transferee must be located in the same state. The High Court observed that the ITC is a transferable business asset and cannot be denied merely because the registrations are in different states.
The SGST Limitation
The inter-state transfer is permissible for the CGST and IGST components of the ITC. The SGST component is state-specific and is generally not transferable across states. The transferee should compute the state-wise ITC and file the ITC-02 accordingly.
The New Registration
The transferee may need to obtain a new GST registration in the state where the transferor was registered, or amend its existing registration to include the transferor’s place of business. The registration transition should be coordinated with the ITC-02 filing so that the credit is not stranded.
Call to Action: For ITC-02 filing, inter-state ITC transfer strategy, or GST registration transition after a scheme, contact office@anujdesaiassociates.com or 9619456656. Website: https://anujdesaiassociates.com. LinkedIn: linkedin.com/in/ca-anuj-desai-122547230.