refund of input tax availability of refund to the successor company

[Umesh Marike]

The firm X has transferred its business as a whole to company Y. The firm is exporter of services and has unutilised input tax credit (GST input) eligible for refund. The firm is yet to claim refund from the department. The firm intends to transfer the input to the transferee company which as per provisions of Rule 41 it can. Now the transferee company is also an exporter and does not carry on any local supply. In such circumstance whether the transferee company can claim refund of input tax transferred by transferer firm based on export performance of the transferor firm. I have not been able to find any provision relating to the claim by transferee in the Act or Rules. Can any one opine on this?

[Rajendra Prasad]

Dear Mr Umesh,

1. There is no such provision to claim the refund by the successor company. Your observation is correct.

2. The rule enables us to transfer the ITC only. For one of my client , I have first claimed refund before transferring the ITC.

3. To get the refund of accumulated ITC , I have an idea. Please start exporting the services by paying IGST and claim the refund , if you have already transferred the ITC , this will solve your refund problem. But check the procedure for one export invoice till you receive the refund.

AI Summary

Input tax credit refund: successor companies cannot claim transferred refund entitlement; plan transfers to preserve refund access. The GST framework permits transfer of accumulated input tax credit on transfer of business, but contains no provision allowing a successor company to claim a refund that accrued to the transferor prior to transfer; consequently, transfer conveys credit balances but not a statutory refund entitlement, and practical workarounds include the transferor claiming refund before transfer or the transferee undertaking IGST-export procedures to enable refund claims.