Page 26 - GSTL_16th July 2020_Vol. 38_Part 3

J68 GST LAW TIMES [ Vol. 38
It may be noted that the provision is for a registered person, not for a legal entity.
Among the arrangements that it mentions as leading to a change in the constitu-
tion of the registered person as per this provision, ‘lease’ finds explicit mention.
This indicates that the term “change in constitution of a registered person” does
not mean a change in ownership. It means a change in who will operate the busi-
ness. It may also be noted that ‘business’, as per definition in Section 2(17)(a) of the
Act, includes “any trade or commerce”. Further, the situations specified in Section
18(3) do not require that the business be transferred as a going concern. The provi-
sion merely states that there should be a specific provision for transfer of liabilities.
Applicability of Section 18(3) to a registered person which is not a legal entity
Considering the applicability of Section 18(3) to situations other than
change in legal constitution of a business, it is seen that
■ A branch is a ‘registered person’, to which Section 18(3) can apply.
■ Because the definition of ‘business’ includes any trade or commerce,
the shifting of the operations of trade or commerce carried out from
the branch, to the HO, can be seen as a ‘transfer of the business’ un-
der GST, or alternatively as ‘merger’.
■ The section requires ‘change in the constitution of a registered per-
son’. Lease is included in the enumeration of arrangements leading
to ‘change in the constitution of a registered person’ though it does
not lead to change in constitution as generally understood.
■ Hence the term has to be expansively construed in keeping with the
context : we may understand ‘change in the constitution of the reg-
istered person’ to mean a change in arrangements that will impact
the GST registration.
■ There is no requirement that the unit is to be transferred as a going
concern.
In interpreting provisions in GST, it can be seen that GST has re-written the dic-
tionary in many respects. Thus, “supply” is something other than we hitherto un-
derstood, a “distinct person” is actually another location of the same person, a “re-
cipient” of service is the one who pays for it and not the one who actually receives
the service; and so on. Hence, terms in GST have to be read in the context of and
for the purposes of GST. Where not clearly defined, the context supplies a clue.
In view of this, we can construe the closure of a branch of the company
as a transfer of business from the registered person ‘x’ (branch) to the registered
person ‘y’ (company head office registration); and input tax credit can be trans-
ferred to the HO under Section 18(3). This is done by filing Form ITC-02 on the
GST portal. A chartered accountant is required to certify that the business is be-
ing transferred along with its liabilities, as stipulated in Rule 41 of the CGST
Rules.
Possible objections
As mentioned at the outset, there is no explicit provision for such trans-
fer of credit upon closure of a branch. The GST department is likely to object on
the ground that this is not a transfer of business to another legal entity, which the
ordinary understanding of ‘transfer of business’ may suggest. They may also ar-
gue that there has been no transfer of liabilities. In view of the likelihood of dis-
putes and litigation, certain precautions may be taken against interest or penalty.
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