Page 67 - GSTL_2nd April 2020_Vol 35_Part 1

Apportionment of Input Tax Credit (ITC) in cases of
business reorganization under Section 18(3) of CGST
Act read with Rule 41(1) of CGST Rules —
Clarifications
Subject: Clarification in respect of apportionment of input tax credit (ITC) in
cases of business reorganization under section 18(3) of CGST Act read
with rule 41(1) of CGST Rules - Regarding.
Representations have been received from various taxpayers seeking
clarification in respect of apportionment and transfer of ITC in the event of
merger, demerger, amalgamation or change in the constitution/ownership of
business. Certain doubts have been raised regarding the interpretation of sub-
section (3) of section 18 of the Central Goods and Services Tax Act, 2017
(hereinafter referred to as the CGST Act) and sub-rule (1) of rule 41 of the Central
Goods and Services Tax Rules, 2017 (hereinafter referred to as the CGST Rules) in
the context of business reorganization.
2. According to sub-section (3) of section 18 of the CGST Act,
“Where there is a change in the constitution of a registered person on
account of sale, merger, demerger, amalgamation, lease or transfer of the
business with the specific provisions for transfer of liabilities, the said
registered person shall be allowed to transfer the input tax credit which
remains unutilized in his electronic credit ledger to such sold, merged,
demerged, amalgamated, leased or transferred business in such manner
as may be prescribed.”
Further, according to sub-rule (1) of rule 41 of the CGST Rules :
“A registered person shall, in the event of sale, merger, demerger,
amalgamation, lease or transfer or change in the ownership of business
for any reason, furnish the details of sale, merger, demerger,
amalgamation, lease or transfer of business, in FORM GST ITC-02,
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 :

GST LAW TIMES  2nd April 2020  131