Merger of two GSTIN in the same State - Procedure to be followed

[haribabu koduri]

There are two registrations in one State. There is one manufacturing unit under each of the registrations. To merger both the GSTINs, is it required that -

(i) finished goods to be sold by raising tax invoice from one unit to another unit;

(ii) stores and spares to be sold by raising tax invoice from one unit to another unit and

(iii) plant and machinery to be sold by raising tax invoice from unit to another unit.

The second unit (which is going to be continued) can avail ITC. But, transfer of stores and spares, plant and machinery is a cumbersome task, involving huge documentation. Since both the units are of same company, is it required to transfer stores & spares and Plant & machinery also by raising tax invoice.

Experts are requested to give their views.

[Sadanand Bulbule]

Dear querist,

Plz refer:

Liability in case of amalgamation or merger of companies.

 Section 87. (1) When two or more companies are amalgamated or merged in pursuance of an order of court or of Tribunal or otherwise and the order is to take effect from a date earlier to the date of the order and any two or more of such companies have supplied or received any goods or services or both to or from each other during the period commencing on the date from which the order takes effect till the date of the order, then such transactions of supply and receipt shall be included in the turnover of supply or receipt of the respective companies and they shall be liable to pay tax accordingly.

(2) Notwithstanding anything contained in the said order, for the purposes of this Act, the said two or more companies shall be treated as distinct companies for the period up to the date of the said order and the registration certificates of the said companies shall be cancelled with effect from the date of the said order.

Rule 41. Transfer of credit on sale, merger, amalgamation, lease or transfer of a business.-

(1) A registered person shall, in the event of sale, merger, de-merger, amalgamation, lease or transfer or change in the ownership of business for any reason, furnish the details of sale, merger, de-merger, amalgamation, lease or transfer of business, in FORM GST ITC-02, electronically on the common portal along with a request for transfer of unutilized input tax credit lying in his electronic credit ledger to the transferee:

Provided that in the case of demerger, the input tax credit shall be apportioned in the ratio of the value of assets of the new units as specified in the demerger scheme.

¹[Explanation: - For the purpose of this sub-rule, it is hereby clarified that the “value of assets” means the value of the entire assets of the business, whether or not input tax credit has been availed thereon]

(2) The transferor shall also submit a copy of a certificate issued by a practicing chartered accountant or cost accountant certifying that the sale, merger, de-merger, amalgamation, lease or transfer of business has been done with a specific provision for the transfer of liabilities.

(3) The transferee shall, on the common portal, accept the details so furnished by the transferor and, upon such acceptance, the un-utilized credit specified in FORM GST ITC- 02 shall be credited to his electronic credit ledger.

(4) The inputs and capital goods so transferred shall be duly accounted for by the transferee in his books of account.

[haribabu koduri]

Section 87 deals with merger, amalgamation or transfer of business of one company to another company.

In the instant case, the intended transfer is between two GSTINs of the same company, in one State.

[Sadanand Bulbule]

Are your two registrations are companies or what is the status?

[haribabu koduri]

Company is one. We have two GSTINs - One for one unit and another for 2nd unit. Both are in the same State. PAN is same. We have taken separate GSTIN for 2nd unit (new line) since the State incentive department has advised us. Now, they told if you are able to identify sales, then there is no requirement of separate registration. To have administrative convenience, we want to cancel one registration and merge both the units into one GSTIN.

[Sadanand Bulbule]

Consult the jurisdictional LGSTO office.

[Amit Agrawal]

A. Apply for adding "additional place of business" in the GSTN (whose registration is to be continued) for the premises whose GSTN will be surrendered. 

A1. Once, above-said application for adding additional place of business is approved by the tax-Dept. in the GSTN (whose registration is to be continued), Raise tax-invoices from GSTN (whose registration is to be surrendered) against ALL goods lying with it to the GSTN (whose registration is to be continued). Please also ensure that each available ITC is availed in GSTN (whose registration is to be surrendered) & nothing is left to be claimed for future. 

A2. Value for above-supplies can be anything due to second proviso to Rule 28 of the CGST Rules, 2017. This method can be deployed for transfer / supplies of each inputs, finished goods & semi-finished goods. 

A3. Still, for transfer / supply of 'capital goods', please follow procedure prescribed u/s 18 (6) of the CGST Act, 2017 read with rule 40 & 44 of the CGST Rules, 2017. This is necessary to avoid litigation. 

A4. Para A3 should be first done and after reducing tax-liability from available ITC balances at the GSTN (whose registration is to be surrendered), Para A2 can be executed as you have greater flexibility to decide 'taxable value' due to second proviso to Rule 28 of the CGST Rules, 2017. This will avoid / minimize payment of tax-liability in cash. Please make use your available ITC balances at the GSTN (whose registration is to be surrendered) becomes ZERO after transfer of all goods lying there to the GSTN (whose registration is to be continued).

A5. All above supplies should be without physical movement (i.e. without E-way bills) and consignee address with be very same address of the GSTN (whose registration is to be surrendered. i.e. the place is already added as ‘additional place of business’ in the GSTN (whose registration is to be continued).

A6. Kindly surrender other GSTN registration after filing Form GSTR-3B paying above outward liabilities. And, take ITC in the GSTN (whose registration is to be continued). 

A7. Stock registers should be suitably maintained accordance to facts & above procedure. 

These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.

[Shilpi Jain]

You can treat it as a sale of going concern if all conditions are satisfied, in which case no GST will be liable on the transfer of assets. Generally in case of a merger these conditions are satisfied.

Any ITC balance can be transferred through ITC-02

AI Summary

Merger of GST registrations requires transfer of input tax credit via prescribed form, invoices for goods, and capital goods procedure. Merger of two GST registrations in the same State requires filing prescribed electronic details to transfer unutilised input tax credit, acceptance by the transferee to credit that ITC, and accounting by the transferee for inputs and capital goods. Practical steps include adding the premises as an additional place of business on the continued registration, effecting intra-entity supplies by tax invoice for stock and stores, following the statutory procedure for capital goods adjustments, and surrendering the redundant registration after discharging outward liabilities and maintaining appropriate stock records.