Clarification in respect of apportionment of input tax credit (ITC) in cases of business reorganization under section 18 (3) of UPSGST Act read with rule 41(1) of UPSGST Rules

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....er section 18 (3) of UPSGST Act read with rule 41(1) of UPSGST Rules - reg. Representations have been received from various taxpayers seeking clarification in respect of apportionment and transfer of ITC in the event of merger, demerger, 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 Uttar Pradesh State Goods and Services Tax Act, 2017 (hereinafter referred to as the UPSGST Act) and sub-rule (1) of rule 41 of the Uttar Pradesh Goods and Services Tax Rules, 2017 (hereinafter referred to as the UPSGST Rules) in the context of business reorganization. 2. According to sub-section (3) of section 18 of the UPSGST Act, 2. ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....T. In order to ensure uniformity in the implementation of the provisions of the law, the Commissioner, in exercise of its powers conferred by section 168 of the UPSGST Act clarifies the issues involved in the Table below. S. No. Issue/ Question Clarification a. (i) In case of demerger, proviso to rule 41 (1) of the UPSGST 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 UPSGST Rules provides for apportionment of the input tax credit in the ratio of ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....f all-India ratio of value of assets, i.e. 40/100=0.4. Similarly, unutilized ITC of XYZ in State of U.P. will be transferred to ABC in ratio of value of assets in State of U.P., i.e. 10/40 = 0.25. (ii) Is the transferor required to file FORM GST ITC - 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 UPSGST Rules explicitly mentions 'demerger'. Other forms of business reorganization where part of business is hived off or business is transferred as a going concern etc. have not been covered in the said rule. Wherever business reorganization results in partial transfer....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....s to transferee B. Accordingly, the amount of ITC to be transferred from A to B shall be 60% of 20 lakh (total sum of CGST, SGST and IGST credit) i.e. 12 lakh. The total amount of ITC to be transferred to the transferee (i.e. sum of SGST, CGST/ and IGST credit) should not exceed the amount of ITC to be transferred, as determined under sub-rule (1) of rule 41 of the UPSGST 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, CGST, SGST) 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)   Sta....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....tilized in his electronic credit ledger to such sold. merged, demerged, amalgamated, leased or transferred business in such manner as may be prescribed." Further, sub-rule (1) of rule 41 of the UPSGST Rules prescribes that the registered person shall file the details 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 UPSGST Act along with sub-rule (1) of rule 41 of the UPSGST 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 releva....