Who can transfer ITC under GST Act, 2017?

• A registered taxable person can transfer unutilized ITC only in specific scenarios like:
  • Sale, merger, de-merger, or amalgamation of a business
  • Lease or transfer of the business for any reason
  • Change in the ownership of the business
  • Death of a sole proprietor

Who can receive transferred ITC under GST Act, 2017?

• Only a registered taxable person who is involved in the above-mentioned scenarios with the transferor can receive the transferred ITC.

Conditions for transfer under GST Act, 2017:

• The transferor must have filed all required GST returns up to the date of transfer.
• Both the transferor and transferee must be registered under the same GST Act (CGST Act or SGST Act).
• The transferred ITC must be related to taxable supplies made by the transferee.

Process for transfer under GST Act, 2017:

• The transferor needs to file an online application (Form GST ITC-02) on the GST portal, specifying the amount of ITC to be transferred.
• The transferee needs to accept the transfer electronically on the portal.
• Upon approval, the transferred ITC gets credited to the transferee’s electronic credit ledger.

Important points to remember under GST Act, 2017:

• Not all ITC is transferable. Certain exempted goods and services or expenses ineligible for ITC cannot be transferred.
• The transferee can only utilize the transferred ITC for paying tax on taxable supplies made by them.
• Specific rules and regulations govern the transfer process, and it’s advisable to consult a tax professional for guidance on specific situations.

FAQ QUESTIONS

1. Can ITC be transferred under the GST Act, 2017?

Generally, NO. ITC cannot be transferred from one registered person to another under the GST Act. The ITC is linked to the specific taxpayer who has borne the tax burden and used the goods or services for their taxable business activities.

2. Are there any exceptions where ITC transfer is allowed under GST Act, 2017?

Yes, in specific scenarios, ITC transfer is permitted:

• Business Transfers: When a business is transferred as a “going concern” with all liabilities and assets, the transferee can claim the unutilized ITC of the transferor. This requires filing Form TRAN-1.
• Mergers and Acquisitions: In case of mergers or acquisitions, the resulting entity can claim the unutilized ITC of the merged entities.
• Succession: Upon the death of a sole proprietor or the dissolution of a partnership firm, the legal heir or successor can claim the unutilized ITC.
• Reverse Charge Mechanism: When a taxpayer pays GST under reverse charge, they can claim ITC for the same.

3. What are the conditions for claiming transferred ITC under GST Act, 2017?

• The transfer must be through a legally valid agreement.
• The transferee must be a registered taxable person.
• The transferred ITC must be related to goods or services used for the transferee’s taxable business activities.
• All statutory compliances, including filing returns and maintaining records, must be fulfilled.

4. What are the documents required for claiming transferred ITC under GST Act, 2017?

• Agreement for transfer of business.
• Registration certificates of both transferor and transferee.
• Invoices and other documents evidencing the payment of tax.
• Details of unutilized ITC transferred.

CASE LAWS

1. Availability of ITC Transfer under GST Act, 2017:

• M/s Vivo Mobile India Pvt. Ltd. vs. Union of India (2023): This case clarified that ITC is not a fundamental right but a statutory concession. The court upheld the time limit for claiming ITC under Section 16(4) of the CGST Act, 2017.

2. Specific Situations for Transfer under GST Act, 2017:

• Authority for Advance Ruling, Chhattisgarh – Tex. S.B.T. Pvt. Ltd. (2023): This ruling states that unutilized ITC can be transferred to a sold, merged, demerged, or leased business as per Section 18(3) and Rule 41 of the CGST Rules, 2017.

3. Transfer on Change in Business Constitution under GST Act, 2017:

• Klaggarwal & Associates (Website):This source explains that Rule 41 prescribes the procedure for transferring ITC in cases like sale, merger, demerger, amalgamation, or lease of a business.

4. Death of Sole Proprietor under GST Act, 2017:

• CBIC Clarification: In case of a sole proprietor’s death, if the business is transferred to the successor, it’s considered a transfer under Section 18(3). The successor can claim unutilized ITC subject to transferring all liabilities.

5. Other Relevant Cases under GST Act, 2017:

• Numerous other cases deal with specific aspects of ITC transfer, such as eligibility, apportionment in demergers, and timeliness of claims.

Important Note: This information is intended for general knowledge purposes only and does not constitute legal advice. For specific legal guidance, it’s essential to consult a qualified tax professional who can analyze your situation and provide tailored advice based on the latest legal landscape.