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

Debate on Refund of Unutilized ITC Transferred via ITC-02 Under Section 18(3) of CGST Act and Rule 41 A query was raised regarding the refund of unutilized Input Tax Credit (ITC) transferred through ITC-02 when GST rates on input materials are higher than those on output materials. One expert explained that ITC transfer under ITC-02 is applicable in cases of business sale, merger, demerger, amalgamation, lease, or transfer, as per section 18(3) of the CGST Act, 2017, and rule 41 of the CGST Rules, 2017. Another expert mentioned that claiming such a refund might be challenging unless the credit can be utilized for other supplies with higher tax rates. A third expert confirmed the refund's admissibility.