In re Flytxt Mobile Solutions Private Limited (GST AAR Kerala)
Kerala Authority for Advance Ruling (AAR) has addressed a legal and technical issue concerning the transfer of Input Tax Credit (ITC) following an interstate business merger. The case involved M/s Flytxt Mobile Solutions Private Limited, a company in Kerala, which had merged with M/s Mventus Solutions Private Limited, a firm with a GST registration in Haryana. Post-merger, Flytxt attempted to transfer the unutilized ITC balance of approximately ₹22.3 lakh from Mventus’s electronic credit ledger in Haryana to its own GSTIN in Kerala. The GST portal, however, prevented this action, displaying an error message that the transferor and transferee must be in the same state.
The AAR examined whether this interstate transfer of ITC was permissible under the law, given the technical barrier. The applicant’s argument was primarily based on Section 18(3) of the CGST Act, 2017, which allows for the transfer of unutilized ITC in cases of a change in a registered person’s constitution due to a merger. The applicant contended that the law does not specify any geographical restrictions on such transfers. Since the credit in question consisted of CGST and IGST, which are central taxes, there was no conflict with state-specific tax laws. The AAR’s ruling confirmed this position, stating that the law “does not put any embargo” on the transfer of CGST and IGST between GSTINs in different states following a merger. The authority affirmed the primacy of the statutory provisions over the technical limitations of the GST portal.
