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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 CGST Act read with rule 41(1) of CGST RulesX X X X Extracts X X X X X X X X Extracts X X X X ..... e 41(1) of CGST Rules, in order to ensure uniformity in the implementation of the provisions of law across the field formations, which is annexed herewith. In exercise of powers conferred by section 168 of the Tripura State Goods and Services Tax Act, 2017 (Tripura Act No. 9 of 2017) for the purpose of uniformity in the implementation of the Act it is instructed to follow the clarification issued vide Circular No. 133/03/2020-GST dated 23 rd March, 2020 by the Department of Revenue, Central Board of Indirect Taxes and Customs, GST Policy Wing. Encl.: Circular No. 133/03/2020-GST. [No.F.1-11(8)-TAX/GST/2020(Part)/3256-351] (Nagesh Kumar B, IAS) Chief Commissioner of State Tax Government of Tripura Circular No.133/03/2020-GST F.No. CBEC-20/06/13/2019-GST Government of India Ministry of Finance Department of Revenue Central Board of Indirect Taxes Customs GST Policy Wing *** New Delhi, dated the 23rd March, 2020 To, The Principal Chief Commissioners/Chief Commissioners/Principal Commissioners/ Commissioners of Central Tax (All) / The Principal Director Gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In order to ensure uniformity in the implementation of the provisions of the law, the Board, in exercise of its powers conferred by sub-section (1) of section 168 of the CGST Act clarifies the issues involved in the Table below. S. No. Issue / Question Clarification a. (i) In case of demerger, proviso to rule 41 (1) of the CGST 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 CGST Rules provides for apportionment of the input tax credit in the ratio of the value of assets of the new units as specified in the demerger scheme. Further, the explanation to sub-rule (1) of rule 41 of the CGST Rules states that value of assets means the value of the entire assets of the business, whether or not input tax credit has been availed thereon. Under the provisions of the CGST Act, a person/ company (havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sults in partial transfer of business assets along with liabilities. c. (i) Whether the ratio of value of assets, as prescribed under proviso to rule 41 (1) of the CGST Rules, shall be applied in respect of each of the heads of input tax credit viz. CGST/ SGST/ IGST/ Cess? No, the ratio of value of assets, as prescribed under proviso to sub-rule (1) of rule 41 of the CGST Rules, shall be applied to the total amount of unutilized input tax credit (ITC) of the transferor i.e. sum of CGST, SGST/UTGST and IGST credit. The said formula need not be applied separately in respect of each heads of ITC (CGST/SGST/IGST). Further, the said formula shall also be applicable for apportionment of Cess between the transferor and transferee. Illustration A: The ITC balances of transferor X in the State of Maharashtra under CGST, SGST and IGST heads are 5 lakh, 5 lakh and 10 lakh respectively. Pursuant to a scheme of demerger, X transfe₹ 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, SGST and IGST credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 d. (i) In order to calculate the amount of transferable ITC, the apportionment formula under proviso to rule 41(1) of the CGST Rules has to be applied to the unutilized ITC balance of the transferor. However, it is not clear as to which date shall be relevant to calculate the amount of unutilized ITC balance of transferor. According to sub-section (3) of section 18 of the CGST Act, 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 provisions for transfer of liabilities, the said registered person shall be allowed to transfer the input tax credi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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