Taxability on consolidation of Multiple GST number on same PAN into single GST number

[Pradeep Singhi]

Respected Sir/Ma'am,

A tax payer registered in same state having two GST number (GSTN) under same PAN. Now, taxpayer want to cancel one GSTN and consolidate transaction of both GSTN into single remaining GSTN. All the asset and stock of cancelled GSTN is going to be merged into the remaining GSTN. With regards to aforesaid transaction we seek expert advice on below mentioned queries:

1. Whether issuance of tax invoice mandatory for transferring assets/stock between two GSTNs owned by the same person, or does it fall under the exemption for transfer of a going concern?

2. Whether schedule II para 4(c) will be applicable on the aforesaid transaction?

3. Whether provision of S. 29(5) of CGST Act 2017 will be applicable for cancelled GSTN?

4. Whether any remaining ITC balance can be transferred to another GSTN? If yes, how?

Note: Same business is operated from both the GSTN.

[YAGAY andSUN]

1. Under Section 25(4) of the CGST Act, 2017, registrations obtained in the same State under a single PAN are treated as distinct persons. Consequently, transfer of assets/stock between such GSTINs constitutes a “supply” under Schedule I, even if made without consideration. Hence, issuance of a tax invoice is mandatory in terms of Section 31 read with Rule 55/46, unless the transaction qualifies as a transfer of a “going concern”. The exemption relating to transfer of a going concern (Sl. No. 2 of Notification No. 12/2017-CT (Rate)) applies only where the entire business is transferred as a running unit. In the present case, since only one GSTIN is being cancelled and activities are consolidated, it may qualify as transfer of a going concern only if the entire undertaking (assets, liabilities, employees, contracts, etc.) is transferred as a whole. Failing this, normal taxable supply provisions apply.
2. Paragraph 4(c) of Schedule II deems transfer of business assets as supply of goods where such assets are transferred or disposed of. However, where the transaction is covered as a transfer of a going concern, the same is treated as supply of service and exempt. Accordingly, Schedule II para 4(c) will apply only where the transaction is not structured as a going concern transfer.
3. Section 29(5) of the CGST Act is applicable upon cancellation of registration. It mandates payment of an amount equivalent to the ITC attributable to inputs, semi-finished goods, finished goods and capital goods (reduced by prescribed percentage) held in stock on the day immediately preceding cancellation, or the output tax payable on such goods, whichever is higher. However, if the stock/assets are duly supplied (on payment of tax or as exempt going concern transfer), the requirement under Section 29(5) stands effectively addressed.
4. Transfer of unutilized ITC between GSTINs is permissible under Section 18(3) read with Rule 41 (Form GST ITC-02), only in case of transfer of business by way of sale, merger, demerger, amalgamation, lease or transfer of business with specific provision for transfer of liabilities. Accordingly, if the transaction is structured as transfer of a going concern with transfer of liabilities, the balance ITC can be transferred to the transferee GSTIN by filing Form GST ITC-02, duly certified by a Chartered Accountant or Cost Accountant. In absence of such structure, ITC transfer is not permissible.

[Raam Srinivasan Swaminathan Kalpathi]

Dear Querist

Please structure the transaction as provided under Section 18(3)r w r 41. Thanks

[Shilpi Jain]

You can regard it as a going concern sale.

ITC-02 transfer would be possible.

Old registration cancellation and adding the location into the existing registration as additional place is necessary.

AI Summary

Distinct persons and going concern transfer determine tax invoice, stock treatment, and ITC transfer on GST registration consolidation. Transfer of assets, stock and business operations between two GST registrations held under the same PAN in the same State is ordinarily a supply between distinct persons, requiring a tax invoice unless the restructuring qualifies as a transfer of a going concern. On cancellation of one registration, the provisions relating to tax on stock and capital goods apply, and unutilised input tax credit can be transferred to the continuing GSTIN only where the transaction fits the prescribed business-transfer mechanism, including filing of Form GST ITC-02 and transfer of liabilities.