Introduction:
Tax Payer who is Registered under GST, has right to transfer Un utilised ITC lying in Electronic Credit Ledger in certain circumstances. When there is a change in the constitution of a registered person for situations like sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisions for transfer of liabilities in this situation the specific Registered person has been allowed to transfer the input tax credit which remains unutilised in his electronic credit ledger due to sold, merged, demerged, amalgamated, leased or transferred business.
Legal Background :
This provision is enumerated in Section 18(3) of CGST Act, 2017. Prescribed rule is Rule 41 in CGST Rules,2017 which provided ITC-02 has to be filled in the event of sale, merger, demerger, amalgamation, lease or transfer or change in the ownership of business for any reason. Form ITC-02 has to filled 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.
Error found while filling ITC-02 on GST Portal:
But it has been found that on GST Portal such Form ITC-02 has not been filled due to technical error coming over screen while filling the same on GST Portal. A petitioner named Umicore Autocat India Pvt. Ltd has knocked the doors of Bombay High Court and ruling declared in July 2025 on this issue. Let’s Discuss here the Judgement pronounced by Bombay High Court.
Umicore Autocat India Pvt. Ltd. Versus Union of India (2025) 32 Centax 416 (Bom.)
Writ Petition No. 463 of 2024, declared on 10-7-2025
Two Judge bench Decision of Bombay High Court
Justice Bharati Dangre and Justice Nivedita P. Mehta
Issue:
Whether Transfer of unutilized ITC lying in electronic credit ledger of transferor company to amalgamated company is allowed irrespective of fact that companies are located in different States?
Facts:
-Transferor is situated in Goa and the Transferee Company i.e. the Petitioner Company being registered under the GST in Satara (Maharashtra).
-Petitioner was an entity which had come into existence after amalgamation of a Goa base Transferee Company with a Maharashtra based company.
-The petitioner faced rejection while filling Form GST ITC-02 on the GST Portal due to system error: “Transferee and Transferor should be of the same State/UT”.
Respondent’s Arguments:
-Section 25(4) treats each State registration as a distinct person — so inter-State credit transfer is not allowed.
– GST portal is built to allow ITC transfer only within the same State; change would require systemic overhaul.
-The GST system/portal is designed in alignment with the Circular No. 133/03/2020-GST, which mandate that the form GST ITC-02, can only be filed where both entities are registered in the same State, therefore, making it mandatory that both the Transferor and Transferee are registered in the same State to file form GST ITC-02.
– Circular 133/03/2020-GST restricts ITC-02 filings to same-State transferor and transferee.
– Permitting cross-State SGST transfer would lead to loss of revenue to the originating State (Goa).
– Placed reliance on MMD Heavy Machinery (Madras HC) decision that disallowed similar credit movement.
Petitioner’s Arguments:
-Petitioner contended that neither section 18(3) of CGST Act nor rule 41 of CGST Rules impose any such restriction.
– Section 18(3) and Rule 41 impose no restriction on inter-State ITC transfer on merger/amalgamation.
– Rejection of ITC-02 by the GST portal is based on portal logic, not law.
– Scheme of amalgamation was approved by NCLT and includes transfer of all liabilities and assets, including ITC.
– Petitioner voluntarily gave up the ITC to avoid loss to the state of Goa.
Decision Declared:
– No restriction is imposed on transfer of ITC from one State to another.
– ITC transfer is allowed whenever there is change in constitution of registered person on account of sale, merger, demerger, amalgamation, lease or transfer of business with a specific provision of transfer of liability.
– Petitioner is entitled to enjoy unutilized ITC in electronic ledger of transferor company irrespective of boundaries of two companies.
-Transferor company has ceased to function and operate and all its liabilities along with ITC must go to transferee company.
– However, permitting SGST to be utilized in State of Maharashtra would result in financial loss to State of Goa.
-Therefore, IGST and CGST amount lying in electronic credit ledger of transferor company was allowed to be transferred to petitioner company
– Section 18(3) of the CGST Act permits ITC transfer on merger/amalgamation without specifying any State-wise limitation.
– Rule 41 of the CGST Rules outlines procedure via ITC-02 but again, does not restrict transfer to same-State registrations.
– The Court observed that GSTN portal restrictions cannot override statutory provisions and termed them ultra vires.
– CGST and IGST are either fully or partly collected by the Central Government, no financial loss would occur due to their transfer from Goa to Maharashtra.
– The Court allowed transfer of CGST and IGST to the amalgamated entity in Maharashtra.
Direction issued:
The transfer of the IGST and CGST Credit, in the electronic credit ledger, deserve to be transferred to the Petitioner. In the peculiar circumstances, The Court permit the IGST and CGST amount lying in the electronic credit ledger of the Transferor Company to be transferred to the Petitioner Company by physical mode for the time being, subject to the adjustments to be made in future. The court also request the GST Council as well as the GST Network to provide for mechanism to deal with such contingencies, when the ITC is sought to be transferred from one State to another or from one State to any Union Territory by updating its network to deal with such a situation.
Cases Cited and Discussed:
Crawford v. Spooner — (1846) 6 Moore PC 1 — Referred [Para 38]
Gladstone v. Bower — (1960) 3 All ER 353 (CA) — Referred [Para 39]
Ratio:
the Bombay High Court has held that unutilized Input Tax Credit (ITC) can be transferred from a company registered in one State to another company registered in a different State following a court-sanctioned amalgamation without any restriction under GST law.
Conclusion:
This decision is a major relief for businesses undergoing inter-state mergers. It restores the intent of GST, seamless credit flow across the supply chain and confirms that technical limitations of the portal should not defeat substantive rights under the law. Even in other situation which are enumerated in Section 18(3) i.e. sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisions for transfer of liabilities, Unutilised Credit lying Electronic Credit ledger can be transferred from one state to other state of IGST and CGST as there is no revenue loss to Any State.
Epilogue:
This landmark ruling doesn’t just resolve a technical roadblock — it sets a precedent that law must prevail over system design. By allowing the transfer of CGST and IGST credits across State lines in genuine restructuring cases, the Bombay High Court has safeguarded taxpayer rights and restored the GST’s promise of a unified tax framework. It’s now up to the GST Council and GSTN to align technology with the law, ensuring that no taxpayer is forced to fight for a benefit the law already grants.
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Author: Miss Zalak Sohil Dalal – Advocate| B.com, LL.B., LL.M. | Advocate & Tax Consultant, Surat.
Miss Zalak Sohilkumar Dalal is a 28-year-old practising advocate and tax consultant based in Surat, specialising in GST and Income Tax, with over seven years of experience. Enrolled with the Bar Council of Gujarat and the Bar Council of India since 2020, she holds an LL.M. in Human Rights from VNSGU, Surat, and certifications in cyber law. She serves as a Managing Committee Member (Western Zone) of AIFTP for 2024–25, delivers lectures on GST, and has authored articles in reputed tax journals. She actively participates in legal study circles and refresher courses and has also represented VNSGU in university-level basketball.
