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How to Transfer ITC in Mergers Using Form GST ITC-02

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Mar 22, 2024
4 Minutes

ITC-02 is a pivotal form facilitating the transfer of Input Tax Credit (ITC) between GSTINs during corporate mergers and acquisitions. This form simplifies the transition of unutilized ITC from the electronic credit ledger of one business entity to another.

Understanding ITC-02 and Its Role
Form GST ITC-02 serves as a declaration for ITC transfer in situations such as business sales, mergers, or demergers. The transferor must submit this form, and the transferee is required to respond. Although no specific deadline is stipulated by the Act or Rules, extensive understanding of GST management can be derived from resources like "GST on the Transfer of Business."

Significance of Filing ITC-02
Following the GST rollout, numerous business structural modifications have taken place. To transfer unused ITC from the transferor's electronic credit ledger to the new entity, filing GST ITC-02 is essential. This ensures that all input tax credit claims fully benefit the transferee's working capital.

ITC-02 Format
The structure consists of:
1. Basic details: GSTIN, trade name, and legal name of both entities.
2. ITC transfer specifics: The amount of ITC available and its intended transfer under main headings.
3. Certification: Details of the certifying Chartered Accountant (CA) or Cost Accountant.

Prerequisites for Filing
1. Both entities must have valid GST registration.
2. The transferor must possess ITC in the electronic credit ledger.
3. The transferor must have filed all previous GST returns.
4. All merger-related transactions and liabilities should be finalized.
5. Business transfer must include liability provisions certified by a CA or Cost Accountant.

Steps in the ITC-02 Filing Procedure
    • Transferor Actions:
• Log into the GST Portal.
• Go to Services > Returns > ITC Forms to access ITC-02 and select "Prepare Online."
• Fill in transferee details by updating GSTIN and entering the ITC amount per major head. Review auto-populated ITC from the ledger.
• Include certification details from a CA or Cost Accountant, upload the certificate, and save the form.
• Finalize submission using EVC or DSC, verifying with OTP.

    • Transferee Actions:
• Visit Services > User Services > ITC-02 Pending for Action on the GST Portal.
• Check details via ARN and decide to accept or reject the transfer.
• Upon acceptance, confirm and file using DSC or EVC. Monitor status updates in ITC-02 Pending for Action.

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