Want to Transfer ITC? Know How to File Form ITC-02 in GST Portal

Form ITC-02 is the form for transferring unutilized Input Tax Credit ( ITC ) balances from one GST Identification Number ( GSTIN ) to another. This transfer is essential in situations where businesses undergo mergers, demergers, amalgamations, acquisitions, or any restructuring that requires the movement of ITC.

PRE-CONDITIONS FOR FILING ITC DECLARATION IN FORM GST ITC-02

The following conditions must be met for being eligible to file the FORM GST ITC-02:

1. In case any registered entity undergoes sale, merger, de-merger, amalgamation, lease or transfer, the acquired entity must file ITC declaration for transfer of ITC in the FORM GST ITC-02.
2. The acquired or transferor entity must have matched Input Tax Credit available in the Electronic Credit Ledger, as on effective date of merger/ acquisition/ amalgamation / lease/ transfer.
3. The acquiring entity (transferee) and the acquired entity (transferor), both should be registered under the GST regime.
4. The acquired entity (transferor) must have validly filed all the returns for the past periods.
5. All transactions categorised as “Pending for action” of the merging entity should be either accepted, rejected or modified and any liabilities arising out of the returns filed by the transferor must be paid.
6. The transfer of business should be accompanied by specific provisions for the transfer of liabilities, supported by a certificate issued by a Chartered Accountant or Cost Accountant. These liabilities encompass stayed demands, whether related to tax, litigation, or recovery cases.

ITCs WHICH CAN BE TRANSFERRED

The following ITC can be transferred by filing the FORM GST ITC-02:

1. Matched ITC balance available in the transferor’s Electronic Credit Ledger;
2. Such ITC appearing under the major heads – Central tax, State / UT tax, Integrated tax, and CESS can be transferred by filing FORM GST ITC-02.

The amount of ITC that is provisional or un-matched, cannot be transferred by the Acquired Entity (transferor) using this process.

CERTIFICATES TO BE SUBMITTED

To file Form GST ITC-02, the acquired entity (transferor) is required to furnish a certificate issued by a practising Chartered Accountant or Cost Accountant. This certificate serves as confirmation that the sale, merger, amalgamation, lease, or transfer of business has been executed with specific provisions for the transfer of liabilities. Without this certificate, Form GST ITC-02 cannot be filed.

The involvement of a practicing Chartered Accountant or Cost Accountant adds credibility to the certification process, as these professionals possess the necessary expertise to assess the financial implications of the business transfer and accurately certify the provisions made for transferring liabilities.

APPLICATION PROCEDURE: BOTH TRANSFEROR AND TRANSFEREE OF BUSINESS MUST FOLLOW

STEPS TO BE TAKEN BY TRANSFEROR (ACQUIRED)

To transfer the matched unutilized ITC by filing the FORM GST ITC-02, please follow the below steps:

1. Access the GST Portal. The GST Home page gets displayed.

2. Using your valid credentials, login to the GST Portal. The Taxpayer’s Dashboard (transferor) gets displayed.

3. Navigate to the Services > Returns > ITC Forms option. The GST ITC Forms page gets displayed.

4. Click the Prepare Online button on GST ITC-02.

Notes:

• The FORM GST ITC-02 opens-up.
• The amounts of matched unused ITC get auto-filled from the transferor’s Electronic Credit Ledger.
• Transferor may choose to transfer all or partial ITC, as desired. For each major head, the Amount of matched ITC to be transferred needs to be filled by the transferor.

5. Enter the GSTIN of the transferee.

6. Enter the Amount of matched ITC to be transferred for each major head under the Details of ITC to be transferred section. The entered amount must be less than or equal to the amount of ITC that is shown as available in the Electronic Credit Ledger.

7. Under the section on Particulars of certifying Chartered Accountant or Cost Accountant, the acquired entity (transferor) needs to specify the details of a certificate from a practicing chartered accountant or cost accountant, certifying that the sale / merger / amalgamation / lease or transfer of business has been done with specific provision of the Act and Rules. Enter the following details:

            a). Name of the certifying accounting firm.

            b). Name of the certifying Chartered Accountant / Cost Accountant in the certifying firm.

            c). Membership number of the certifying firm.

            d). Date of certificate issued by the certifying accounting firm.

8. Attach a scanned copy of the certificate.

Notes:

• The attachment should either be in JPEG / PDF format.
• File size of attachment should not exceed 500 KB.

9. Click SAVE to upload the entered data and the attachment to the GST Portal.

Notes:

• The system will display a confirmation upon saving.
• You can save your application at any time.
• After saving the FORM GST ITC-02, if you return to this form at a later point in time, all the line items will get auto-populated as they were saved.
• You can also retrieve the saved FORM GST ITC-02 by navigating to Services à User Services à My Saved Applications.

10. Check the statement box to declare that the furnished information is true and correct.

11. Select an Authorised Signatory from the drop-down, containing a list of authorised signatories that you have configured in the system.

12. File the FORM GST ITC-02 either using the DSC or EVC option.

13. Click PROCEED on the Warning pop-up message.

14. Enter the OTP as received.

15. Click VERIFY.

Notes:

• The system will display a confirmation message on successful filing of the FORM GST ITC-02.
• The confirmation message will also contain the system-generated ARN.

STEPS TO BE TAKEN BY TRANSFEREE (ACQUIREE)

After the transferor (or the acquired entity) has filed the FORM GST ITC-02 to transfer the matched unutilized ITC, the transferee (or the acquiring entity) needs to login to the GST Portal and either accept or reject the ITC transfer. To take an action on the transferor’s initiated process of ITC transfer, please follow the below steps:

16. Access the GST Portal and login with your valid credentials.

17. Navigate to the Services > User Services > ITC02 – Pending for actions option.

18. Click the ARN.

Notes:

• The filed details of ITC to be transferred corresponding to the selected ARN get displayed.
• The details include the amount of matched ITC to be transferred against each of the major heads – Central Tax, State / UT Tax, Integrated Tax, and CESS.

19. Click either ACCEPT or REJECT based upon the decision that you want to exercise as the transferee.

Notes:

• On ACCEPT: The ITC will be transferred to the transferee, and the Electronic Credit Ledger of the acquiring entity (transferee) will get updated.
• On REJECT: The ITC will not be transferred to the transferee, and the Electronic Credit Ledger of the acquired entity will receive back the ITC. The Electronic Credit Ledger of the merged entity (transferee) will not get affected.
• After clicking ACCEPT / REJECT on this screen, the transferee needs to file his response in the system to complete the process. Simply clicking the ACEEPT / REJECT button without completing the filing steps does not make any changes to Electronic Credit Ledgers of either transferor or transferee.

20. Assuming that we have clicked ACCEPT, the system will display a confirmation message, and will prompt the user to proceed with filing the response.

21. Check the declaration to state that the given information is true and correct.

22. Select an Authorised Signatory from the drop-down, containing a list of authorised signatories that you have configured in the system.

23. File the form either using the DSC or EVC option.

24. Click PROCEED on the Warning pop-up message.

25. Enter the OTP as received.

26. Click VERIFY.

27. Click BACK to return to the ITC-02 – Pending for actions screen.

28. Notice the status changes to Accepted.

After the transferor submits Form GST ITC-02, the details are relayed to the transferee via the GST portal. Upon acceptance, the unutilized credit mentioned in Form GST ITC-02 is transferred to the transferee's Electronic Credit Ledger. The transferee retains the flexibility to revise its decision regarding acceptance or rejection of the ITC transfer request until the transferor finalises it on the GST portal.

When the acquiring entity accepts the ITC transfer request from the transferor through Form GST ITC-02, the ITC is seamlessly transferred to the transferee, updating its Electronic Credit Ledger.

Conversely, if the acquiring entity rejects the ITC transfer request, the credits remain with the transferor, and its Electronic Credit Ledger is adjusted accordingly. The Electronic Credit Ledger of the acquiring entity remains unaffected by this decision.

In cases of demerger, the ITC is allocated based on the value of assets among the new units, as specified in the demerger scheme.

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