TaxTMI 
TaxTMI 
TaxTMI 
The Kerala AAR in the matter ofIn Re: M/s. Flytxt Mobile Solutions Private Limited - 2025 (9) TMI 1054 - AUTHORITY FOR ADVANCE RULING, KERALA held that the applicant is eligible to transfer the closing balance of CGST and IGST appearing in the electronic credit ledger of the Haryana GSTIN of a merged company to the Kerala GSTIN of the transferor company on merger, despite the GST portal's technical restrictions rejecting inter-state transfers.
Facts:
Ms. Flytxt Mobile Solutions Private Limited ('the Applicant') is engaged in supplying IT software services and holds a GSTIN in Kerala.
The Applicant's business merged with M/s. Mventus Solutions Private Limited and M/s. Madmart Services Private Limited, as approved by NCLT dated June 8, 2020, effective April 1, 2018. M/s. Mventus Solutions held an unused ITC balance of Rs. 22,29,668 in its Haryana GSTIN electronic credit ledger, which the Applicant sought to transfer to its Kerala GSTIN.
The GST portal disallowed the transfer via Form GST ITC-02, citing that transferee and transferor must be registered in the same State/UT. The Applicant contended that no statutory provision under Section 18(3)CGST Act 2017 and Rule 41 of the CGST Rules restricts inter-state transfer of CGST and IGST credits on merger.
The Applicant approached the Kerala AAR by way of advance ruling under GST provisions to seek clarity on entitlement to interstate transfer ITC on merger.
Issue:
Whether the Applicant is eligible to transfer the closing input tax credit balance comprising CGST and IGST from the Haryana GSTIN of the merged company to its Kerala GSTIN, notwithstanding the GST portal's technical embargo on inter-state transfer?
Held:
The Kerala AAR in In Re: M/s. Flytxt Mobile Solutions Private Limited - 2025 (9) TMI 1054 - AUTHORITY FOR ADVANCE RULING, KERALA held as under:
- Observed that, under Section 18(3) of the CGST Act and Rule 41 of the CGST Rules, a registered person on merger is allowed to transfer unutilized ITC to the resulting entity in accordance with prescribed procedure.
- Noted that, there is no statutory embargo on the interstate transfer of CGST and IGST credits on merger even if the transferor and transferee GSTINs belong to different States.
- Held that, the GST portal’s rejection citing interstate transfer restriction is a technical issue and not founded on law.
- Held that, the Applicant to approach the jurisdictional authority for resolution of the technical barrier and not to resort to procedural workarounds involving availing and reversing credit which may render it inadmissible.
- Held that, the Applicant is eligible to transfer the closing ITC balance of CGST and IGST on merger, and clarified for the resolution of the technical issue involved in the portal.
Our Comments:
The judgment aligns with prior judicial pronouncements emphasizing statutory intention over GST portal restrictions The Hon’ble Bombay High Court in the case of 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 held that there is no prohibition in the GST law or rules against transferring Input Tax Credit between different States in case of merger or amalgamation. The Bombay High Court’s ruling reinforces the principle that Input Tax Credit is a vested statutory right, and its transfer cannot be blocked on technical or procedural grounds. Section 18(3) and Rule 41 of the CGST Rules do not restrict ITC transfer merely because the merging units are located in different States. The Court also pointed out GST portal limitations cannot override a taxpayer’s lawful entitlement under the Act.
Relevant Provisions:
Section 18(3) – Availability of credit in special circumstances, CGST Act, 2017:
“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 provision for transfer of liabilities, the said registered person shall be allowed to transfer the unutilized input tax credit in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in the manner prescribed.”
Rule 41. Transfer of credit on sale, merger, amalgamation, lease or transfer of a business, CGST Rules, 2017
“(1) A registered person shall, in the event of sale, merger, de-merger, amalgamation, lease or transfer or change in the ownership of business for any reason, 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:
Provided that in the 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.
Explanation : - For the purpose of this sub-rule, it is hereby clarified that the 'value of assets' means the value of the entire assets of the business, whether or not input tax credit has been availed thereon.
(2) The transfer or shall also 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.
(3) The transferee shall, on the common portal, accept the details so furnished by the transfer or and, upon such acceptance, the un-utilized credit specified in FORM GST ITC-02 shall be credited to his electronic credit ledger.
(4) The inputs and capital goods so transferred shall be duly accounted for by the transferee in his books of account.”
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