Refund of ITC transferred through ITC 02

[Rajesh Kumar]

Sir / madam

Please guide, is refund claim of unutilized ITC available which was transferred through ITC-02 to which party cannot claim and utilise due to GST rates on inputs materials are higher than the outward ?

if yes, what are the terms and conditions as per provisions?

[Rajagopalan Ranganathan]

Sir,

The ITC transferred under ITC-2 relates to transfer of ITC in case of sale, merger, demerger, amalgamation, lease or transfer of a business under sub-section (3) of section 18 of CGST Act, 2017. The procedure is prescribed under rule 41 of CGST Rules, 2017. Since the said provisions permit transfer of unutilized ITC on sale, merger, demerger, amalgamation, lease or transfer of a business under sub-section (3) of section 18 of CGST Act, 2017 you can claim the refund of the same if the rate of tax in output materials are lower than the tax on input materials.

[Shilpi Jain]

Refund of this circulated credit seems to be difficult unless there are other supplies in which this credit can be used where the rate of tax is higher.

[KASTURI SETHI]

Such refund is admissible. No need to post more information as already well explained by both experts.

AI Summary

Refund of transferred input tax credit may be available where transferee cannot utilise credit due to tax rate mismatch. Refund claims for unutilized input tax credit transferred via ITC-02 relate to credit moved on account of sale, merger, demerger, amalgamation, lease or transfer of a business; refund availability depends on the transferred ITC remaining unutilized because outward supplies attract lower tax than inputs, and claimants must satisfy the ITC-02 procedural requirements while noting that refund may be difficult where no higher-rated supplies exist for utilisation.