Whether unutilized ITC as closing balance in partnership firm can be transferred to private limited co.

[samiuddin ansari]

Dear Sir,

My query is such that my friend's firm which is partnership firm engaged in outward supply of frozen fish for export i.e. out of total turnover, 99 percent sale or supply relates to export that has been effecting on payment of IGST at applicable rates. SGST officer conducted verification and raised query on available balance of ITC credit. The fact of the matter, is such that, this firm has also been functioning in the same premises from where a new company started by the same partners as directors in another name and also using same machinery for process of the product. Partnership firm as stated above is still functioning in the same premises from where a new private limited company is also functioning. In other words, the machinery and premises are being used for production purpose by the new private limited company. The firm is having a considerable amount as ITC as closing balance and now there is no outward supply by the firm. In fact, all the machineries and its premises are also being used by the new private limited company having the same partners as Directors. Now, their apprehension is such that whether his ITC balance available in firm will get lapsed as they forgot to file amendment for transfer of credit to new private limited company at the material time. In view of this, we solicits your valuable guidance with supportive clarification or notification issued by the Board or similar cases, if any decided by Advance Ruling Authority involving similar issue and if no option whether they have to surrender the registration of firm which is still active and they are also filing regular returns in time.

[KASTURI SETHI]

Himalyan blunders committed by your friend. ITC shall not lapse. I could not find any relevant case law, decision of AAR or any circular in your favour. Your friend will have to resort to Section 18(3) of CGST Act. No other option is available with your friend.

AI Summary

Input tax credit transfer: unutilized ITC in partnership can be preserved by invoking Section 18(3) remedy. The adviser concludes that the unutilized Input Tax Credit in the partnership firm shall not lapse and that the only available recourse is to invoke Section 18(3) of the CGST Act to address transfer/continuity of the credit; no favourable case law, AAR decision, or Board circular was found.