Transfer of Input tax Credit in case of change in constitution of business

In case of 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 means remaining unutilised ITC in the electronic credit ledger is to be transferred to the sold, merged, de-merged, amalgamated, leased or transferred business.

As per circular number 96/15/2019 GST dated 28.03.2019, transfer or change in the ownership of business includes transfer or change in the ownership due to death of the sole proprietor. Therefore, all these provisions are applicable when there is a change in ownership due to death of the sole proprietor.

Input tax credit on capital goods

In case of supply of capital goods or plant and machinery, on which input tax credit has been taken, the registered person shall pay an amount equal to the input tax credit taken on the said capital goods or plant and machinery reduced by 5% per quarter of the year or the tax on the transaction value of such capital goods or plant and machinery determined u/s 15, whichever is higher.

Where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable person may pay tax on the transaction value of such goods determined u/s 15.

How to transfer input tax credit or ITC

The registered person shall furnish the details of sale, merger, de-merger, 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.

In case of demerger, the input tax credit shall be apportioned in the ratio of the value of assets of the new units as specified in the demerger scheme.

The transferor shall submit a copy of a certificate issued by a practicing chartered accountant or cost accountant certifying that the sale, merger, de-merger, amalgamation, lease or transfer of business has been done with a specific provision for the transfer of liabilities. It has to be furnished on the common portal.

The transferee shall on the common portal accept the details so furnished by the transferor and, upon such acceptance, the un-utilised credit specified in Form GST ITC-02 shall be credited to his electronic credit ledger.

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

is a fellow member of the Institute of Chartered Accountants of India. He lives in Bhubaneswar, India. He writes about personal finance, income tax, goods and services tax (GST), company law and other topics on finance. Follow him on facebook or instagram or twitter.