Procedure For Merger of Unit and Transfer of ITC

As per Rule 41 of CGST Rules 2017, a registered taxpayer can apply for transfer the Input Tax Credit available in the electronic credit ledger to another business entity in case of transfer of business by way of sale of business/merger by filing of ITC declaration in FORM GST ITC-02.

However, there are certain pre-requisites for filing this form which are as mentioned below:

1. The transferor entity must have ITC available in the electronic credit ledger, as on effective date of merger/ acquisition/ amalgamation / lease/ transfer.

2. The transferee entity and transferor entity, both should be registered under the GST regime.

3. The transferor entity must have validly filed all the returns for the past periods.

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

5. 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.

6. The inputs and capital goods so transferred shall be duly accounted for by the transferee in his books of account.

The process of transferring unutilized ITC by filing the FORM GST ITC-02 is broadly divided into two steps:

1. The transferor entity files declaration in FORM GST ITC-02 in the GST portal, specifying the available ITC in each major head.

2. The transferee entity accepts / rejects the same in GST portal.

Steps to be taken by the Transferor Entity:

To transfer the unutilized ITC by filing the FORM GST ITC-02 please follow the below steps:

1. Access the GST Portal. The GST Home page gets displayed.

2. Using your valid credentials, login to the GST Portal. The Taxpayer’s Dashboard (transferor) gets displayed

3. Navigate to the Services> Returns > ITC Forms The GST ITC Forms page gets displayed.

4. Click the Prepare Online button on the GST ITC-02 tile

Notes:

♠ The FORM GST ITC-02 opens-up.

♠ The amounts of unused ITC get auto-filled from the transferor’s Electronic Credit Ledger.

♠ Transferor may choose to transfer all or partial ITC, as desired. For each major head, the Amount of ITC to be transferred needs to be filled by the transferor

1. Enter the GSTIN of the transferee.

2. Enter the Amount of ITC to be transferred for each major head under the details of ITC to be transferred The entered amount must be less than or equal to the amount of ITC that is shown as available in the Electronic Credit Ledger.

3. Under the section on particulars of certifying Chartered Accountant or Cost Accountant, the acquired entity (transferor) needs to specify the details of a certificate from a practicing chartered accountant or cost accountant, certifying that the sale / merger / amalgamation / lease or transfer of business has been done with specific provision of the Act and Rules. Enter the following details:

a)  Name of the certifying accounting firm.

b) Name of the certifying Chartered Accountant / Cost Accountant in the certifying firm.

c). Membership number of the certifying firm.

d). Date of certificate issued by the certifying accounting firm.

4. Attach a scanned copy of the certificate.

5. Click on save button to upload the entered data and the attachment to the GST Portal

6. Check the statement box to declare that the furnished information is true and correct.

7. Select an Authorized Signatory from the drop-down, containing a list of authorized signatories that you have configured in the system.

8. File the FORM GST ITC-02 either using the DSC or EVC option.

9. Click on proceed button on the Warning pop-up message.

10. Enter the OTPas received & Click on verify button.

In the next stage, the transferee (acquiring unit) of the ITC needs to take an action on your filed FORM GST ITC-02.

Steps to be taken by the Transferee Entity:

After the transferor (or the acquired entity) has filed the FORM GST ITC-02 to transfer the unutilized ITC, the transferee (or the acquiring entity) needs to login to the GST Portal and either accept or reject the ITC transfer.

To take an action on the transferor’s initiated process of ITC transfer, please follow the below steps:

1. Access the GST Portal and login with your valid credentials.

2. Navigate to the Services> User Services > ITC02 – Pending for actions

3. Click the ARN.

4. Click either accepts or reject based upon the decision that you want to exercise as the transferee.

5. Assuming that we have clicked accept, the system will display a confirmation message, and will prompt the user to proceed with filing the response.

6. Check the declaration to state that the given information is true and correct.

7. Select an Authorized Signatory from the drop-down, containing a list of authorized signatories that you have configured in the system.

8. File the form either using the DSC or EVC option.

9. Click on proceed button on the Warning pop-up message.

10. Enter the OTP as received.

11. Click on verify button.

12. Click back to return to the ITC-02 – Pending for actions