Page 24 - GSTL_16th July 2020_Vol. 38_Part 3

J66 GST LAW TIMES [ Vol. 38

INTERNAL REORGANISATION OF BUSINESS
INTERNAL REORGANISATION OF
BUSINESS — CAN INPUT TAX CREDIT BE
TRANSFERRED?
INTERNAL REORGANISATION OF BUSINESS
By
Radha Arun
GST & CUSTOMS CONSULTANT

As part of the process of consolidating and opti-
mising resources in the aftermath of the lockdown, many
companies are closing down branches and depots in vari-
ous parts of the country. The question is whether input tax credit balance at these
locations can be recovered by the company. In the discussion of this below, for
convenience, all types of establishments of a single PAN-based entity in different
States will be referred to as branches.
Branch is a distinct taxable person
Section 25 of the CGST Act (hereinafter “the Act”) provides as follows :
“(4) A person who has obtained or is required to obtain more than one reg-
istration, whether in one State or Union territory or more than one State or
Union territory shall, in respect of each such registration, be treated as distinct
persons for the purposes of this Act.”
Thus, for the purposes of GST law, a branch which has its own GSTIN is a distinct
person.
“Taxable person” is defined in Section 2(107) of the Act as
“a person who is registered or liable to be registered under section 22 or sec-
tion 24”.
A branch, being a distinct person, is the taxable person in GST.
Surrender of registration
As the branch is a distinct person under GST, with its own independent
registration, closure of the branch will involve surrender of the registration. Sur-
render of registration is governed by Section 29 of the Act read with Rule 20 of
the CGST Rules. Section 29 provides that a GST registration may be cancelled
where -
(a) the business has been discontinued, transferred fully for any reason
including death of the proprietor, amalgamated, demerged or other-
wise disposed of; or
(b) there is any change in the constitution of the business : or
(c) the taxable person, other than the person registered under sub-section
(3) of section 25, is no longer liable to be registered under section 22
or section 24.
The Act provides for the treatment of goods and input tax credit held by the regis-
tered person at the time of cancellation of registration, as follows.

GST LAW TIMES  16th July 2020  24