TaxTMI 
TaxTMI 
Introduction
India's GST framework was designed to eliminate tax cascading and promote seamless credit flow. However, its federal structure and digital infrastructure have created unintended complications in inter-State transactions, especially for large-scale corporate reorganizations involving mergers and amalgamations. The recent ruling by the Bombay High Court at Goa in Umicore Autocat India Private Limited, (after amalgamation of M/s Umicore Anandeya India Private Limited) Versus Union of India, Goods and Services Tax Network, New Delhi, Central Board of Indirect Taxes and Customs, The Goods and Services Tax Council (GST Council), New Delhi, The State Tax Officer, Panaji, Goa, The Commissioner, CGST, Patto - 2025 (7) TMI 1188 - BOMBAY HIGH COURT addresses a critical gap in the GST regime concerning the transfer of Input Tax Credit (ITC) across State jurisdictions. This article critically analyses the judgment, situating it within the legal framework and its commercial implications, while advocating for systemic reforms in GST portal architecture and legislative clarity.
Consider a mid-size manufacturer with a registered unit in Goa that amalgamates into a Maharashtra-based entity. Post-merger, the transferee inherits the business, contracts, employees, and liabilities but not the Input Tax Credit accumulated in the transferors electronic credit ledger. Why? Because the GSTN portal prevents Form ITC-02 filing unless both entities are registered in the same State.
Despite no such restriction existing under the CGST Act or Rules, this backend error has led to litigation, uncertainty, and working capital blockages. It is in this context that the Bombay High Court’s decision in Umicore Autocat emerges as a significant judicial intervention.
Legal Framework: Section 18(3) and the GST Ecosystem
The relevant provision at issue is Section 18(3) of the CGST Act, 2017, which reads:
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 unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in such manner as may be prescribed” whereas Rule 41 of the CGST Rules, 2017 prescribes the manner of transfer of credit on sale, merger, amalgamation, lease or transfer of a business via Form GST ITC-02.
What complicates this statutory scheme is Section 25(4) of the CGST Act, 2017, which treats every GST registration as a distinct person. Thus, if a legal entity holds multiple GSTINs in different States, each such registration is deemed to be a separate taxable person.
However, nowhere does the CGST Act or Rules impose a restriction on ITC transfers across distinct persons arising out of a merger sanctioned under the Companies Act.
The Umicore Case: Facts and Procedural History
M/s Umicore Anandeya India Pvt. Ltd. (registered in Goa) was amalgamated into M/s Umicore Autocat India Pvt. Ltd. (registered in Maharashtra) by an NCLT-sanctioned scheme effective 01.04.2019.
At the time of amalgamation, the Transferor had accumulated ITC of approximately Rs. 3.57 crores, including, CGST amounting to Rs. 3,52,84,105, IGST amounting to Rs.3,69,586 and SGST amounting to Rs. 1,39,285.
When the Transferee attempted to file Form ITC-02, the GSTN portal rejected the form on the ground that the transferee and transferor must be in the same State.. Thus, the Petitioner finally moved the Bombay High Court at Goa.
The petitioner in its submission before the Hon’ble Bombay High Court submitted that Section 18(3) of the CGST Act, 2017 and Rule 41 of the CGST Rules, 2017, governing the transfer of Input Tax Credit (ITC) in the event of a merger or amalgamation, did not impose any territorial limitation on the transfer of credit. It is submitted that the merger, duly approved by the National Company Law Tribunal (NCLT), resulted in the transfer of all assets and liabilities from the transferor entity to the transferee entity, and accordingly, the ITC, being a vested right and a part of the overall business liability, ought to flow with such liabilities to the transferee. The petitioner further submits that the restriction on cross-State transfer of ITC arises not from any express provision in law but merely due to the limitations of the current GSTN portal infrastructure. It is respectfully submitted that such a technological constraint cannot override statutory entitlements. Furthermore, in light of Article 269A of the Constitution, which underscores the destination-based character of the GST regime, the seamless transfer of ITC in cases of inter-State mergers is consistent with the broader constitutional framework. In support of this contention, reliance was placed on the ruling of the Andhra Pradesh Authority for Advance Ruling, which, in a similar factual matrix, permitted the transfer of ITC across States pursuant to a merger.
Whereas, the revenue authorities contended that under Section 25(4) of the CGST Act, 2017, each registration obtained in different States or Union Territories is treated as a distinct person for the purposes of the Act. Therefore, the transfer of Input Tax Credit (ITC) from one GSTIN to another, across State jurisdictions, is legally impermissible in the absence of an express enabling provision. It is further submitted that the GSTN portal has been specifically designed to restrict such cross-State filings in order to prevent jurisdictional conflicts and ensure administrative clarity. In support of this position, reliance is placed on the judgment of the Hon’ble Madras High Court in MMD Heavy Machinery (India) Pvt. Ltd. Versus The Assistant Commissioner, The Additional Commissioner of GST, The Assistant Commissioner of CT, The Assistant Commissioner of CT, The Assistant Commissioner, The Chairman, Goods and Services Tax Network (East Wing), The Assistant Commissioner (State Tax) - 2021 (7) TMI 223 - MADRAS HIGH COURT, wherein the Court held that cross-State transfer of ITC is not permissible under the existing legal framework, thereby reinforcing the position that such credits cannot be transferred between distinct persons across States, even in cases of merger or amalgamation.
Judicial Analysis: Law Must Prevail Over Code
The Court rejected the Revenues interpretation and provided a detailed analysis underpinning its decision. Firstly, it emphasized that the plain language of Section 18(3) of the CGST Act, 2017 and Rule 41 of the CGST Rules clearly permits the transfer of Input Tax Credit (ITC) in cases of amalgamation, without imposing any condition that the transferor and transferee must be registered in the same State. The Court invoked the doctrine of casus omissus, holding that a restriction not expressly provided by the legislature cannot be judicially introduced, as doing so would amount to judicial legislation. It also distinguished the case of MMD Heavy Machinery cited by the respondents, noting that the said case dealt with CENVAT credit under the erstwhile tax regime and did not pertain to a merger approved by the National Company Law Tribunal (NCLT), nor did it involve a going concern transfer. Importantly, the Court observed that no revenue loss would arise from permitting the transfer of CGST and IGST credits, as both are central levies. Furthermore, the petitioner had voluntarily waived its claim to SGST credit to avoid any inter-State fiscal conflict. Significantly, the Court held that technological or administrative limitations of the GSTN portal cannot override substantive statutory rights. If the law permits such a transfer, then the same must be facilitated even if it requires manual intervention until the system is suitably upgraded. Consequently, the Court directed the authorities to allow the transfer of CGST and IGST credits through manual adjustment and urged the GST Council and the GSTN to amend the portal architecture to align with the law.
Conclusion
The Umicore ruling is a timely and welcome intervention. It restores legal clarity, reaffirms taxpayer rights, and highlights a key systemic flaw in GST administration. As India deepens its commitment to ease of doing business, it is imperative that legal entitlements not be denied by code-level barriers.
It is now for the GST Council and GSTN to act decisively, amend backend processes, and bring India's GST truly in line with its original promise a seamless, destination-based, and unified tax structure.