Transfer of ITC between two separate GSTIN in a State/UT

ITC-02A

In this article we shall discuss about transfer of Input Tax Credit (ITC) between two or more registered entity having separate GSTIN but owned by one person (Single PAN), in a single State or Union Territory. Rule-41A of Goods and Services Tax Act, 2017 allows a registered person who has separate registration for multiple business places and who intends to transfer the unutilized ITC lying in his electronic credit ledger to recently registered place of business. Now questions may arise as follows:

(1) What is the Form required to file?

According to Rule-41A of Goods and Services Tax Act, 2017, person willing to transfer his unutilized ITC have to file-FORM GST-ITC-02.

(2) Who is eligible to file this form?

A registered can file Form-GST ITC-02A if he has separate GSTIN for multiple places of business in the same State or Union Territory and aims to transfer unutilized matched ITC available in his Electronic Credit Ledger to registered entities.

Example

Sr. No. GSTIN-1 GSTIN-2 Eligible/Ineligible
1 Mumbai (Maharashtra) Pune (Maharashtra) Eligible
2 Mumbai (Maharashtra) Bhopal (Madhya Pradesh) Ineligible

(3) What is the time limit to file the form?

Form-GST ITC-02A must be filed within 30 days of registration of new GSTIN. Here one thing must be kept into mind is that unutilized ITC can be transferred from existing (Transferor) GSTIN to new (Transferee) GSTIN only, i.e. it cannot be transferred from new registration (Transferee) to existing (Transferor) GSTIN. Another important matter is that ITC can be transferred only in respect of matched invoices.

(4) How much credit can be transferred?

ITC shall be transferred to newly registered entity in the ratio of value of assets held by them at the time of registration. Here “Value of Asset” means value of all assets of the business whether ITC on such asset was availed or not.

(5) What is the mechanism for transfer of ITC?

  • The Transferor Entity will file Form GST ITC-02A. As soon as the Transferor Entity files GST ITC-02A his Electronic Credit Ledger will get debited.
  • Based on the form filed by Transferor Entity, the same ITC will be reflected to confirm, into system of Transferee Entity.
  • Now, Transferee Entity may “Accept” or “Reject” the ITC transferred by Transferor Entity. However, Transferee Entity cannot modify transferred ITC.
  • If Transferee entity accepts the ITC than Electronic Credit Ledger of transferee entity will be credited, but if transferee entity rejects ITC than Electronic Credit Ledger of transferor entity will again be re-credited.

Let’s see the entire process in chart,

Take a new registration in the same State or Union Territory where one GST registration is there.

File Form-GST ITC-02A by transferor entity within 30 days from the date of registration of transferee entity through EVC or DSC.

ITC will get debited from the Electronic Credit Ledger of Transferor Entity.

Confirmation SMS and mail will be forwarded to transferor entity by system automatically.

Transferee Entity can “Accept” or “Reject” ITC forwarded by Transferor Entity.

If Transferee Entity “Accept” it than after filing Form-GST ITC-02A through EVC or DSC his Electronic Credit Ledger will be credited.

If Transferee Entity “Reject” it than after filing Form-GST ITC-02A through EVC or DSC Electronic Credit Ledger of Transferor Entity will be re-credited and confirming mail and SMS will be forwarded by system automatically.

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