Section 87 LIABILITY TO PAY IN CASE OF AN AMALGAMATION/MERGER - GST Ready Reckoner - GST

LIABILITY TO PAY IN CASE OF AN AMALGAMATION/MERGER Any supply between date earlier to the date of the order will be taxable in respect of respective companies As per section 87 (1) : When two or more companies are amalgamated or merged in pursuance of an order of court or of Tribunal or otherwise and the order is to take effect from a date earlier to the date of the order and any two or more of such companies have supplied or received any goods or services or both to or from each other during the period commencing on the date from which the order takes effect till the date of the order, then such transactions of supply and receipt shall be included in the turnover of supply or receipt of the respective companies and they shall be liable to pay tax accordingly [Section 87(1)]. Companies to be treated as distinct companies (as if no merger has been taken) for the period upto date of order For the purposes of this Act, the said two or more companies shall be treated as distinct companies for the period up to the date of the said order [ Section 87(2)]. Cancellation Of Registration as Distinct Companies with effect from date of the said order The registration certificates of the said companies shall be cancelled with effect from the date of the said order [Section 87(2)]. Example 1: let say, ABC ltd. and BDF ltd. Merges together to form MNO Ltd. The date of the order of the tribunal is 1st Dec, 2017. However the merger has been ordered to be effected from 1st Oct, 2017. Answer 1) Any supplies between ABC ltd. and BDF Ltd. Between the period from 1st Oct, 2017 to 30th Nov., 2017 will be taxable in the hands of the respective companies. (Section 87(1)) Simply putting the two companies till the date of order, even though the merger was to take effect at an earlier date. It would be as if the merger has not taken place till the date of the order. ( Section 87(2)) ie to be treated as distinct companies. Cancellation of registration Registration of ABC Ltd. and BDF Ltd. as distinct companies shall be cancelled with effect from 1st Dec, 2017(and not from 1st Oct, 2017).