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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 Assam GST Act read with rule 41(1) of Assam GST RulesX X X X Extracts X X X X X X X X Extracts X X X X ..... fer 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 Assam Goods and Services Tax Act, 2017 (hereinafter referred to as "the Assam GST Act") and sub-rule (1) of rule 41 of the Assam Goods and Services Tax Rules, 2017 (hereinafter referred to as "the Assam GST Rules") in the context of business reorganization. 2. According to sub-section (3) of section 18 of the Assam GST 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 liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Table below : Sl. No. Issue/question Clarification a. (i) In case of demerger, proviso to rule 41(1) of the Assam GST 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 Assam GST 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 Assam GST Rules states that "value of assets" means the value of the entire asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Assam GST Rules explicitly mentions 'demerger'. Other forms of business reorganization where part of business is hived off or business in transferred as a going concern, etc. have not been covered in the said rule. Wherever business reorganization results in partial transfer of business assets along with liabilities, whether the proviso to rule 41(1) of the Assam GST Rules, 2017 shall be applicable to calculate the amount of transferable ITC ? Yes, the formula for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be transferred to the transferee (i. e., sum of CGST, SGST/UTGST and IGST credit) should not exceed the amount of ITC to be transferred, as determined under sub-rule (1) of rule 41 of the Assam GST Rules (refer 3(c)(i) above). However, the transferor shall be at liberty to determine the amount to be transferred under each tax head (IGST, CGST, SGST/UTGST) within this total amount, subject to the ITC balance available with the transferor under the concerned tax head. This is shown in the illustration below : (1) (2) (3) (4) (5) (6) State Asset ratio of transferee Tax heads ITC balance of transferor (pre-apportionment) as on the date of filing Form GST ITC-02) Total amount of ITC transferred to the transferee under Form GST ITC-02 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsferee. A conjoint reading of sub-section (3) of section 18 of the Assam GST Act along with sub-rule (1) of rule 41 of the Assam GST Rules would imply that the apportionment formula shall be applied on the ITC balance of the transferor as available in electronic credit ledger on the date of filing of Form GST ITC-02 by the transferor. (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 Assam GST Rules, 2017 ? According to section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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