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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 HPGST Act read with rule 41(1) of HPGST RulesX X X X Extracts X X X X X X X X Extracts X X X X ..... constitution/ownership of business. Certain doubts have been raised regarding the interpretation of sub-section (3) of section 18 of the Himachal Pradesh Goods and Services Tax Act, 2017 (hereinafter referred to as the HPGST Act) and sub-rule (1) of rule 41 of the Himachal Pradesh Goods and Services Tax Rules, 2017 (hereinafter referred to as the HPGST Rules) in the context of business reorganization. 2. According to sub-section (3) of section 18 of the HPGST 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 HPGST 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 HPGST 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 HPGST Act, a person/company (havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Form GST ITC-02 only in those States where both transferor and transferee are registered. b. The proviso to rule 41(1) of the HPGST 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 HPGST Rules, 2017 shall be applicable to calculate the amount of transferable ITC ? Yes, the formula for apportionment of ITC, as prescribed under proviso to sub-rule (1) of rule 41 of the HPGST Rules, shall be applicable for all forms of business re-organization tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 of the HPGST 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 ITC balance of transferor (post-apportionment) after filing of Form GST ITC 02) ITC balance of transferor (post- apportionment) after filing of Form GST ITC 02) (Col (4) Col (5)) Delhi 70% CGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mula 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 HPGST 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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