High Court Requests GST Council and GSTN to Enable Inter-State Transfer of Unutilised ITC in Mergers, Amalgamations

The Bombay High Court has allowed a petitioner company to transfer unutilized Input Tax Credit (ITC) from its merged company, Umicore Anandeya India Pvt. Ltd., which was registered in Goa.

The petition was filed by Umicore Autocat India Private Limited to challenge the action of the restriction imposed by GST authorities on transferring unutilized Input Tax Credit (ITC) from its merged company, because the two companies were registered in different states.

This happened when the petitioner tried to transfer ITC from the old company (Umicore Anandeya) through the GST Portal. But the portal showed an error stating that the “Transferee and Transferor should be of the same State/UT“. The petitioner mentioned that neither Section 18(3) of the CGST Act 2017 nor Rule 41 of the Central Goods and Services Tax Rules, 2017, levies such restriction.

The High Court of Bombay at Goa observed that Section 18 (3) and Rule 41 do not put such a restriction on transferring unutilised ITC to the new entity to which the entity of merged. Therefore, the court allowed the company to physically transfer the IGST and CGST credits in the electronic credit ledger, subject to adjustments to be made in future. The Court also requested the GST Council and GSTN to resolve the system and allow such transfers online in the future on the GST Portal.