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THE INSIGHT

Existing Units Can Transfer Whole Unutilized ITC To New Unit
By Anshul Jain, Adv, SRA Consulere Advocates
May 15, 2019

THE Central Goods and Services Tax Act, 2017 (here in after referred to as ‘the Act' ) has been amended vide the Central Goods and Services Tax (Amendment) Act, 2018. The provisions, except few, of the Amendment Act were made effective from 01.02.2019 vide Notification No.02/2019-C.T. dated 29.01.2019. Section 25 of the Act has been amended to allow the taxpayers to take separate registration for multiple places of business in the same State or Union Territory.

PLACE OF BUSINESS

The term ‘Place of Business' has been defined under Section 2(85) of the Act. The same is reproduced below for ready reference:

'Section 2(85) 'place of business' includes - 

(a) a place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods, supplies or receives goods or services or both; or

(b) a place where a taxable person maintains his books of account; or  

(c) a place where a taxable person is engaged in business through an agent, by whatever name called;'

The above Definition is very clear and without any ambiguity. Thus, any place which falls within the above Definition can be registered under the Act.

CONDITIONS FOR REGISTRATION OF MULTIPLE PLACE OF BUSINESS

The taxpayer, having multiple place of business in the State or Union Territory and who wishes to take separate registration for all or any of the such place of business, has to satisfy the condition mentioned under Rule 11 of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as ‘the Rules' ). The conditions are as under:

a)  such taxpayer has more than one place of business;

b)  such taxpayer shall not pay tax under Composition Scheme (Section 10) for any of his places of business if he is paying tax under Section 9 for any other place of business;

c)  all separately registered places of business of such taxpayer shall pay tax under the Act on supply of goods or services or both made to another registered place of business of such taxpayer and issue a tax invoice or a bill of supply, as the case may be, for such supply.

TRANSFER OF ITC TO NEWLY REGISTERED UNIT

The newly inserted Rule i.e. Rule 41A of the Rules provides that a taxpayer who has obtained separate registration for multiple places of business can transfer its unutilized Input Tax Credit (hereinafter referred to as ‘ITC' ) to any or all newly registered units. The said Rule 41A(1) is reproduced below for ready reference:

'Rule 41A. Transfer of credit on obtaining separate registration for multiple places of business within a State or Union territory. - (1) A registered person who has obtained separate registration for multiple places of business in accordance with the provisions of rule 11 and who intends to transfer, either wholly or partly, the unutilised input tax credit lying in his electronic credit ledger to any or all of the newly registered place of business , shall furnish within a period of thirty days from obtaining such separate registrations, the details in FORM GST ITC-02A electronically on the common portal, either directly or through a Facilitation Centre notified in this behalf by the Commissioner :

Provided that the input tax credit shall be transferred to the newly registered entities in the ratio of the value of assets held by them at the time of registration.

Explanation.- For the purposes of this sub-rule, it is hereby clarified that the ‘value of assets' means the value of the entire assets of the business whether or not input tax credit has been availed thereon. ' 

[Emphasis & underlining supplied]

It is evident from a careful perusal of the above Rule that a taxpayer who has obtained separate registration for multiple places of business can transfer his unutilized ITC to any or all such newly registered places. The Rule also provides that such ITC can be transferred either wholly or partly i.e. a taxpayer can transfer either the entire unutilized ITC to the newly registered unit(s) or can transfer a part of such unutilized ITC. Further, if the taxpayer has registered two or more new places of business, such taxpayer can either opt to transfer the unutilized ITC to any or all such newly registered units. In case, the taxpayer decides to transfer the unutilized ITC to more than one newly registered unit then the unutilized ITC shall be transferred in the ratio of value of assets held by each such unit at the time of registration.

It is to be noted here that the newly inserted Rule does not provide to consider the value of assets of the existing registered unit. Which means that while transferring the unutilized ITC accumulated at the existing registered unit, the taxpayer may retain the share of unutilized ITC for the existing registered unit or may transfer the entire accumulated ITC to the newly registered units. Thus, it can be concluded that where the taxpayer decides to transfer the unutilized ITC of the existing unit to only one newly registered unit, the taxpayer has an option of transferring the entire unutilized ITC to such newly registered unit irrespective of the value of its assets.

The taxpayer has to file details pertaining to transfer of ITC in Form GST ITC-2A within 30 days of obtaining separate registration and once, the said details are accepted by the newly registered unit, the ITC transferred from existing registered unit will be reflected in the electronic credit ledger of the new unit.

(The views expressed are strictly personal.)