After merger of a proprietorship concern with a private limited company input tax credit available in credit ledger account of proprietorship firm shall be transferred to respective credit ledger account of private limited company. However, the balance of Cash ledger is not transfer – Haryana AAR

M/s B. M. Industries [ADVANCE RULING NO. HAR/HAAR/R/2018-19/02 (AAR – GST – Haryana)]

In this matter the Authority of Advance Rulings, Haryana held that in case of merger of two entities, and the questions raised relate to transfer of ITC lying as balance in electronic credit ledger of the going concern. In this regard, it is observed that section 18(3), provides that 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 credit which remains unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in such manner as maybe prescribed. Further, rule 41 of the CGST/HGST Rules, 2017, provides transfer of credit on sale, merger, amalgamation, lease or transfer of a business. Thus, it is evidently clear that there are provisions in the law, where in case of merger, a registered person, by filing Form GST ITC-02, electronically on common portal, can transfer unutilized input tax credit lying in his electronic credit ledger to the transferee. Here it is to be noted that these provisions pertain to transfer of unutilized input tax credit. These provisions are not applicable to unutilized balance lying in electronic cash ledger.

To read the complete judgment 2018 Taxo.online 602