TaxTMI 
TaxTMI 
Clarification in respect of apportionment of input tax credit (ITC) in cases of business reorganization under section 18(3) of RGST Act read with rule 41(1) of RGST Rules
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....rger, amalgamation or change in the constitution/ownership of business. Certain doubts have been raised regarding the interpretation of sub-section (3) of section 18 of the Rajasthan Goods and Services Tax Act, 2017 (hereinafter referred to as the RGST Act) and sub-rule (1) of rule 41 of the Rajasthan Goods and Services Tax Rules, 2017 (hereinafter referred to as the RGST Rules) in the context of business reorganization. 2. According to sub-section (3) of section 18 of the RGST Act, "Where there is a change in the constitution of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisions for transfer of liabilities, the said registered person shall be allowed ....
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....In case of demerger, proviso to rule 41 (1) of the RGST Rules provides that 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. However, it is not clear as to whether the value of assets of the new units is to be considered at State level or at all-India level. Proviso to sub-rule (1) of rule 41 of the RGST Rules provides for apportionment of the input tax credit in the ratio of the value of assets of the new units as specified in the demerger scheme. Further, the explanation to sub-rule (1) of rule 41 of the RGST Rules states that "value of assets" means the value of the entire assets of the business, whether or not input tax credit has been availed thereon.....
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....-02 in all States where it is registered? No. The transferor is required to file FORM GST ITC-02 only in those States where both transferor and transferee are registered. b. The proviso to rule 41 (1) of the RGST Rules explicitly mentions 'demerger'. Other forms of business reorganization where part of business is hived off or business in transferred as a going concern etc. have not been covered in the said rule. Wherever business reorganization results in partial transfer of business assets along with liabilities, whether the proviso to rule 41(1) of the RGST Rules, 2017 shall be applicable to calculate the amount of transferable ITC? Yes, the formula for apportionment of ITC, as prescribed under proviso to ....
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....rred to the transferee (i.e. sum of RGST, SGST/UTGST and IGST credit) should not exceed the amount of ITC to be transferred, as determined under sub-rule (1) of rule 41 of the RGST Rules [refer 3 (c) (i) above]. However, the transferor shall be at liberty to determine the amount to be transferred under each tax head (IGST, RGST, SGST/UTGST) within this total amount, subject to the ITC balance available with the transferor under the concerned tax head. This is shown in the illustration below: (1) (2) (3) (4) (5) (6) State Asset Ratio of Transferee Tax Heads ITC balance of Transferor (pre-apportionment) as on the date of filing FORM GST ITC-02) Total amount of ITC transferred to the Transferee under ....
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....tails in FORM GST ITC-02 for transfer of unutilized input tax credit lying in his electronic credit ledger to the transferee. A conjoint reading of sub-section (3) of section 18 of the RGST Act along with sub-rule (1) of rule 41 of the RGST Rules would imply that the apportionment formula shall be applied on the ITC balance of the transferor as available in electronic credit ledger on the date of filing of FORM GST ITC-02 by the transferor. (ii) Which date shall be relevant to calculate the ratio of value of assets, as prescribed in the proviso to rule 41(1) of the RGST Rules, 2017? According to section 232 (6) of the Companies Act, 2013, "The scheme under this section shall clearly i....