claiming of input tax credit

[ShankarDurgaVaraPrasad P]

Good afternoon one and all,

hi have one query. one of my clients wants to purchase a beauty parlour which was already established. The seller wants to charge on sale value of beauty parlour. The buyer (my client) wants to use the gst paid as input. Is it possibe to claim the paid gst as input.

kindly reply to this

thanks in advance

[KASTURI SETHI]

You are to see the procedure for transfer of going on concern. As per Schedule-II (serial no.4), it is a supply of services but exempted vide notification no. 12/17-CT(R) dated 28.6.17 as amended (serial no.2 refers).The business will be transferred as a whole.An assessee can transfer its un-utilized Input Tax Credit to the buyer of the business in accordance with the provisions of Section 18(3) of the CGST/SGST Act, 2017 read with Rule 41 (1),(2),(3) & (4) of the CGST/SGST Rules, 2017. See the Explanation added to Rule 41(1) inserted w.e.f. 29.3.19.

For more information on the issue, ITC is not to be shown in GSTR-3 B by the transferee. As soon as ITC-02 is filed and accepted by the transferor, the amount of ITC is automatically credited to the Electronic Credit Ledger of transferee.

[Kashish Gupta]

Dear Shankar Durga Vara Prasad Ji

The GST is not applicable when the business is transferred as a going concern. As stated by you in your query, "The buyer (my client) wants to use the gst paid as input." reckons that seller has charged GST on sale. This is completely wrong because of the reason that exemption given by the Government is absolute and hence mandatory. Therefore, it is advisable to transfer the unutilised input tax credit by way of filing Form GST ITC-02 only. This form is to be supported by a certificate issued by practicing chartered accountant.

AI Summary

Input Tax Credit transfer: unutilised ITC must be moved to buyer when business is transferred as a going concern. When a business is transferred as a whole, the transaction is a transfer of going concern exempt from GST; unutilised Input Tax Credit is transferable to the buyer under the statutory transfer mechanism. The seller must file the prescribed transfer form and provide required supporting documentation, including a chartered accountant's certificate, and upon acceptance the credited ITC is automatically reflected in the buyer's Electronic Credit Ledger. The transferee must not claim that ITC in periodic returns.