Introduction
Form GST ITC-02 is a statutory form prescribed under Rule 41 of the CGST Rules, 2017, enabling the transfer of unutilized Input Tax Credit (ITC) from one registered entity to another in cases of business reorganization.
It is applicable in scenarios such as merger, demerger, sale, amalgamation, or transfer of business, where both assets and liabilities are transferred.
The form ensures that accumulated ITC is seamlessly shifted to the transferee’s electronic credit ledger, subject to acceptance by the transferee and certification by a Chartered Accountant or Cost Accountant.
In case of demerger, the input tax credit shall be apportioned in the ratio of the value of assets of the new units as specified in the demerger scheme.
Input Tax Credit (ITC)
ITC is the credit a business can claim for the tax paid on purchases used in the course of business.
This credit is stored in the electronic credit ledger on the GST portal.
It is to be noted that, as per section 18(3) of Goods & Services Tax Act, 2017, 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 provision for transfer of liabilities, the said registered person shall be allowed to transfer the input tax credit which remains unutilized in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in the manner prescribed.
The inputs and capital goods so transferred shall be duly accounted for by the transferee in his books of account.
Pre-condition
Before filing Form GST ITC-02, the transferor must ensure that the business transfer is carried out with specific provision for transfer of liabilities along with assets, such as in a merger, demerger, sale, or amalgamation.
A certificate from a practicing Chartered Accountant or Cost Accountant must be obtained, confirming that such transfer of liabilities has been properly effected.
Further, the transferee must be an active GST-registered entity under the same PAN, and the unutilized ITC sought to be transferred should be available in the electronic credit ledger of the transferor at the time of filing.
The transferee shall, on the common portal, accept the details so furnished by the transfer or and, upon such acceptance, the un-utilized credit specified in FORM GST ITC-02 shall be credited to his electronic credit ledger.
Step by Step Compliance Process for filing of GST ITC-02
Verify Electronic Credit Ledger
· Check availability of unutilized Input Tax Credit (ITC) in the transferor’s electronic credit ledger.
· Segregate ITC by head (IGST, CGST, SGST, UTGST, Cess).
Obtain Professional Certificate
· Secure a certificate from a practicing Chartered Accountant / Cost Accountant certifying transfer of business and liabilities.
Filing by Transferor
·Login to the GST portal → Navigate to Services > Returns > ITC Forms > ITC-02.
·Fill in details of ITC to be transferred.
·Upload the CA/Cost Accountant certificate.
·Submit and file the form with DSC/EVC.
Action by Transferee
· Login to GST portal → Go to Services > User Services > ITC Forms.
· Review the details filed by transferor.
· Accept / Reject the ITC transfer.
·On acceptance, ITC gets credited to transferee’s electronic credit ledger.
·Retain copy of filed ITC-02 and acceptance order.
·Maintain CA/Cost Accountant certificate and supporting documentation for audit and compliance purposes.
Timeline
·ITC-02 should be filed at the time of transfer of business; there is no fixed due date, but it must align with the effective date of transfer mentioned in the legal documents.
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