In a case of amalgamation, the Gujarat High Court held that Input Tax Credit (ITC) cannot be disallowed merely on the basis that the transferor and transferee companies are situated in different states.
A Bench of Justice A.S. Supehia and Justice Pranav Trivedi held,
Read Also: Gujarat HC: GST ITC as a Transferable Business Asset Can’t Be Denied Due to State-Wise Registrations
“The transfer of the ITC on amalgamation of the company is permissible as per the provision of Section 18(3) of the CGST Act, read with Rule 41 of the CGST Rules. Neither of the provisions prohibits or debars transfer of the ITC on the ground that the transferee and the transferor company are located in different states. We think that the respondent department cannot incorporate something in a statutory form ITC-02 on the GST Portal which is absent in the statutory provisions. The remark which is mentioned on the Form GST ITC-02 does not find a place in the statute. Neither the statute permits nor debars the transfer of ITC after the scheme of amalgamation has been approved by the NCLT. Such an action of restricting the transfer of ITC on the online GST portal is de hors the intention of the provision of Section 18(3) of the CGST Act read with Rule 41 of the CGST Rules.”
The case has emerged from a writ petition submitted via Emerson Process Management (India) Pvt. Ltd., which had amalgamated Pentair Valves and Controls India Pvt. Ltd. as per the scheme approved by the National Company Law Tribunal (NCLT).
The applicant asked to transfer of the unused ITC from the transferor company by submiting Form GST ITC-02 (a statutory form used to transfer unutilised input tax credit in cases of sale, merger, demerger, or amalgamation), but it was not permitted on the GST portal with an endorsement stating that “Transferee and Transferor should be of the same State / U.T.”
The applicant contesting the same claimed that neither Section 18(3) of the CGST Act nor Rule 41 of the CGST Rules levies any such restriction and that a portal-based limitation could not override regulatory norms. Reliance was placed on the decision of the Bombay High Court in Umicore Autocat India Pvt. Ltd.
The Revenue argued that, according to GST provisions, the transfer of Input Tax Credit (ITC) during amalgamation is limited to entities within the same State and cannot be allowed across State lines. They further contended that permitting such transfers could lead to audit challenges and heighten the risk of tax evasion and fraud.
HC rejecting the revenue’s stand held that the restriction imposed via the GST portal is not supported through any regulatory norms and that the same condition could not be embedded in Form ITC-02.
Also, the court complied with the opinion opted by the Bombay High Court in Umicore Autocat India Pvt. Ltd., holding that transfer of ITC upon amalgamation is allowable even where the entities are located in different States.
Important: How GST Software Handles Input Tax Credit (ITC) Tracking
It asked the authorities to accept Form ITC-02 manually and process the transfer in 6 weeks.
Therefore, the writ petition was permitted.
| Case Title | Emerson Process Management (India) Pvt. Ltd. vs. Union of India |
| Case No. | R/Special Civil Application No. 7006 of 2024 |
| For Petitioner | Uchit N. Sheth |
| For Respondent | Shashvata U. Shukla |
| Gujarat High Court | Read Order |
