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TMI BlogClarification in respect of apportionment of input tax credit (ITC) in cases of business reorganization under section 18 (3) of WBGST Act read with rule 41(1) of WBGST RulesX X X X Extracts X X X X X X X X Extracts X X X X ..... payers 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 West Bengal Goods and Services Tax Act, 2017 (hereinafter referred to as the WBGST Act) and sub-rule (1) of rule 41of the West Bengal Goods and Services Tax Rules, 2017 (hereinafter referred to as the WBGST Rules) in the context of business reorganization. 2. According to sub-section (3) of section 18 of the WBGST Act, Where there is a change in the constitution of a registered person on account of sale, merger, demerger, amalgamation, lease or transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by section 168 of the WBGST Act clarifies the issues involved in the Table below. TABLE S. No. Issue / Question Clarification a. (i) In case of demerger, proviso to rule 41 (1) of the WBGST 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 WBGST Rules provides for apportionment of the input tax credit in the ratio of the value of assets of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not on the basis of 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 WBGST Rules explicitly mentions demerger‟. Other forms of business reorganization where part of business is hived off or business is transferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfe₹ 60% of its assets 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, WBGST and IGST credit) i.e . 12 lakh. (ii) How to determine the amount of ITC that is to be transferred to the transferee under each tax head (IGST/ CGST/ WBGST) while filing of FORM GST ITC 02 by the transferor? The total amount of ITC to be transferred to the transferee (i.e. sum of CGST, WBGST and IGST credit) should not exceed the amount of ITC to be transferred, as determined under sub-rule (1) of rule 41 of the WBGST Rules [refer 3 (c) (i) above]. However, the transferor shall be at liberty to determine the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35,00,000 15,00,000 Haryana 40% CGST 25,00,000 3,00,000 22,00,000 WBGS 25,00,000 5,00,000 20,00,000 IGST 20,00,000 20,00,000 0 Total 70,00,000 28,00,000 42,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sferor. (ii) Which date shall be relevant to calculate the ratio of value of assets, as prescribed in the proviso to rule 41 (1) of the WBGST Rules, 2017? According to s ection 232 (6) of the Companies Act, 2013, The scheme under this section shall clearly indicate an appointed date from which it shall be effective and the scheme shall be deemed to be effective from such date and not at a date subsequent to the appointed date . The said legal provision appears to indicate that the appointed date of demerger is the date from which the scheme for demerger comes into force and it is specified in the respective scheme of demerger. Therefore, for the purpose of apportionment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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