AAR Mandates Merger process for Transfer of Unutilised ITC in Electronic Credit Ledger across distinct GSTINs with same PAN, Disallows transfer in absence of Merger [Read Order]

The Authority for Advance Ruling (AAR), Chhattisgarh has held that the unutilised balance of Input Tax Credit (ITC) lying in the Electronic Credit Ledger (E-Credit Ledger) can be transferred on the merger of distinct persons as specified in Section 25(4) of the Central Goods and Services Tax (CGST) Act, 2017 i.e., across two distinct GST Identification Numbers (GSTINs) with the same Permanent Account Number (PAN).

The case involved M/s. SBT Textiles Private Limited, a company with two units registered under separate GSTINs submits an application seeking clarification regarding the transfer of unutilised balance in the electronic credit ledger on the merger of distinct persons within the same state with the same PAN.

The applicant seeks an advance ruling on the transfer of unutilised balances of ITC in the E-credit ledger in two scenarios:

First, in the event of a merger between two distinct GSTINs with the same PAN within the state.

Second, the transfer between distinct GSTINs within the state without following the formal merger process.

The applicant contended that such transfers should be allowed since Section 18(3) of the CGST Act, 2017, allows for the transfer of unutilised ITC in case of a change in the constitution of a registered person, such as through a merger. They also cited Rule 41 of the CGST Rules, 2017, which provided guidance on the transfer of credit in scenarios involving the sale, merger, demerger, amalgamation, lease, or transfer of a business.

The Authority consisting of Smt. Sonal K. Mishra, Joint Commissioner and Shri Shrawan Kumar Bansal, Additional Commissioner ruled that the transfer of unutilised balance in the E-credit ledger on the merger of distinct persons, as specified in Section 25(4) of the CGST Act, 2017, was permissible. This meant that in cases where two distinct GSTINs with the same PAN were merged within the state, the unutilised ITC could be transferred.

However, the authority clarified that there was no specific provision for the transfer of unutilised balances between distinct persons without following the formal merger process. While Rule 87(14) allowed for the transfer of unutilised balances in the cash ledger between distinct persons, there was no corresponding provision for the transfer of balances in the E-credit ledger, the authority added.

In result, the ruling sought by the applicant on the issue of transfer to unutilised balance of ITC lying in the E-credit ledger is not maintainable.

Accordingly, the application filed by the applicant for advance ruling is rejected, being out of the scope of "advance ruling" as stipulated under Section 97(2) of the CGST Act.

To Read the full text of the Order CLICK HERE

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