GST Portal’s Inability to Transfer Unutilized ITC during Company Amalgamation Not a Ground to Deny Credit: Gujarat HC [Read Order]

The Gujarat High Court noted that the inability of the Goods and Services Tax (GST) Portal to transfer unutilized Input Tax Credit (ITC) during the amalgamation of two companies cannot be grounds to deny such credit when there is no dispute as to the rightful claim of ITC.

The petitioner Emerson Process Management (India) Pvt. Ltd. is a private limited company engaged in the manufacture and sale of safety valves and components, and is registered under the GST Acts in Gujarat, Maharashtra, Tamil Nadu, Karnataka and Andhra Pradesh.

Pursuant to an amalgamation scheme approved by the National Company Law Tribunal (NCLT), M/s Pentair Valves and Controls India Pvt. Ltd. stood amalgamated with the petitioner-company. The scheme would see the entire business of the transferor company including all assets and liabilities be transferred to the petitioner, along with the unutilized ITC balance in the books of the transferor company.

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The ITC in question pertained to the CGST Act, 2017 and had been carried forward from the earlier central excise regime by filing Form GST TRAN-1. While the petitioner attempted to transfer such ITC through the GST portal, the same was not permitted due to an error message on the portal.

Due to no positive resolution from the jurisdictional authorities, the present case was instituted.

Uchit N. Sheth, appearing for the petitioner, submitted that the transfer of the ITC is done through the filing of Form GST ITC-02 on the online portal of the GST which the petitioner did. However, a message is displayed on the portal as “Transferee and Transferor should be of the same State -U.T”.

The petitioner counsel submitted that there is no statutory bar on the transfer of ITC if two companies that are located in different states undergo amalgamation pursuant to a scheme approved by the NCLT, relying on the decision of the Bombay High Court in Umicore AutocatIndia (P) Ltd Vs. Union of India (2025).

Standing Counsel Shashvata U. Shukla submitted that such transfer would introduce audit challenges, increasing the risk of tax evasion and fraud, thereby impacting the integrity of the GST system; further stated that such interstate ITC transfer is impossible in the absence of an empowering provision.

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The Division Bench of Justice A.S. Supehia and Justice Pranav Trivedi observed that the petitioner had already carried forward the ITC from the earlier regime through TRAN-1 and that the credit stood reflected in the books pursuant to the amalgamation. In such circumstances, the inability to effectuate the transfer on account of portal-related issues could not be a ground to deny the claim when the entitlement itself was not disputed.

Relying on the ratio laid down in Umicore (Supra), the Court held that the petitioner is entitled to transfer the unutilized ITC arising out of the amalgamation. The Court also noted that restricting the transfer of ITC on the on-line GST portal is de hors the intention of the provision of Section 18(3) of the CGST Act read with Rule 41 of the CGST Rules.

The petition was thus allowed, with the Court directing the petitioner to fill up the Form ITC-02 manually, and the department to process the same.

The Department was further directed to accept such forms manually and process the same till proper amendment or mechanism is provided in uploading the Form ITC-02.

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