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.

AI Summary

Firm Seeks Guidance on ITC Transfer to New Company; Section 18(3) of CGST Act Suggested for Resolution A partnership firm engaged in exporting frozen fish, with a significant closing balance of Input Tax Credit (ITC), is concerned about transferring this ITC to a new private limited company operated by the same partners. The firm is no longer making outward supplies, and both entities use the same premises and machinery. The firm missed filing an amendment to transfer the ITC and seeks guidance on whether the credit will lapse. A response suggests that the ITC will not lapse but advises resorting to Section 18(3) of the CGST Act, as no supporting case law or circulars were found.