The Hon’ble Bombay High Court in the case of Umicore Autocat India Pvt. Ltd. v. Union of India & Ors. [Writ Petition No. 463 of 2024 dated July 10, 2025] held that there is no prohibition in the GST law or rules against transferring GST Input Tax Credit between different States in case of merger or amalgamation.
Facts:
Umicore Autocat India Pvt. Ltd. (“the Petitioner”) a private company registered in Maharashtra, challenged the action of the Respondents in refusing to allow the transfer of unutilized Input Tax Credit (ITC) pursuant to a scheme of amalgamation approved by the NCLT, Mumbai under Section 230 to Section 232 of the Companies Act, 2013.
The amalgamation involved Umicore Anandeya India Private Limited (the Transferor), registered in Goa, with the Petitioner (“the Transferee”). The Transferor had ceased operations and the scheme transferred both assets and liabilities to the Petitioner.
The Transferor attempted to file Form GST ITC-02 to transfer ITC to the Petitioner. However, the GSTN portal rejected the request with an error: “Transferee and Transferor should be of the same State/UT.” The Transferor raised queries and represented the issue to the State Tax Officer, but received no resolution.
The Petitioner contended that neither Section 18(3) of the CGST Act, 2017 nor Rule 41 of the CGST Rules, 2017 impose any restriction based on State jurisdiction for ITC transfer upon amalgamation. The Petitioner argued that the scheme envisaged transfer of both liabilities and credits to the Petitioner, who was entitled to the same under the CGST framework and Articles 269A and 289 of the Constitution.
The Respondents contended that under Section 25(4) of the CGST Act, registrations in different States are treated as distinct persons, and therefore, ITC cannot be transferred inter-State. They further submitted that such a transfer would lead to revenue loss to the State of Goa and that no system functionality exists for such inter-State ITC transfer.
Issue:
Whether the transfer of ITC under Section 18(3) read with Rule 41 of the CGST Rules is permissible between two GSTINs of the same entity located in different States pursuant to amalgamation?
Held:
The Hon’ble Bombay High Court in Writ Petition No. 463 of 2024 held as under:
- Observed that, the object of introducing GST was to allow seamless credit across the supply chain and avoid cascading effect of tax. Section 18(3) of the CGST Act, 2017 read with Rule 41 of CGST Rules, 2017 permits transfer of unutilized ITC in case of merger or amalgamation, without imposing a specific restriction based on registration in different States.
- Noted that, both CGST and IGST are levied and collected by the Central Government and apportioned under Article 269A. Hence, as far as the Centre is concerned, no loss arises even if credit is transferred to a transferee in another State.
- Noted that, the GST system is destination-based and designed for continuity in credit. Denial of such transfer based on technical limitations or distinction between States would defeat the core objective of the legislation.
- Further rejected the Respondents’ contention that ITC earned in one State must be used only in that State, holding that the legislative intent does not support such an interpretation.
- Held that, the GSTN shall permit the transfer of ITC from the Transferor (Goa) to the Transferee (Maharashtra) in accordance with Section 18(3) of the CGST Act and Rule 41 of the CGST Rules.
Our Comments:
The Bombay High Court’s ruling reinforces the principle that Input Tax Credit is a vested statutory right, and its transfer cannot be blocked on technical or procedural grounds. Section 18(3) and Rule 41 of the CGST Rules do not restrict ITC transfer merely because the merging units are located in different States. The Court also pointed out GST portal limitations cannot override a taxpayer’s lawful entitlement under the Act.
Relevant Provisions:
Section 18(3) – Availability of credit in special circumstances, CGST Act, 2017:
“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 provision for transfer of liabilities, the said registered person shall be allowed to transfer the unutilized input tax credit in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in the manner prescribed.”
Rule 41. Transfer of credit on sale, merger, amalgamation, lease or transfer of a business, CGST Rules, 2017
“(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.
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 transfer or 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 transfer or 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.”
Section 2(94) – CGST Act, 2017
“registered person means a person who is registered under section 25 but does not include a person having a Unique Identity Number;”
CLICK HERE FOR OFFICIAL JUDGMENT COPY
(Author can be reached at info@a2ztaxcorp.com)
DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose and for the reader’s personal non-commercial use. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon. Further, no portion of our article or newsletter should be used for any purpose(s) unless authorized in writing and we reserve a legal right for any infringement on usage of our article or newsletter without prior permission.
