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Procedure to Transfer Unutilized Input Tax Credit (ITC) in Case of Sale, Merger, or Demerger

When a business undergoes a sale, merger, demerger, or any similar transformation, the Input Tax Credit (ITC) available in the Electronic Credit Ledger can be transferred to the new entity. This process is done through FORM GST ITC-02 on the GST Portal.

Let’s break down the process step-by-step for both parties involved – the transferor (old business) and the transferee (new business).

 

Pre-Requisites for ITC Transfer

Before filing, ensure the following conditions are met:

• Both transferor and transferee must be registered under GST.
• The transferor must have filed all past returns.
• ITC should be matched and available in the Electronic Credit Ledger.
• A certificate from a Chartered Accountant (CA) or Cost Accountant is required.
• The business transfer should include transfer of liabilities.
• All pending transactions must be resolved.

 

Step-by-Step Process

 

Step 1: Actions by the Transferor (Old Business)

Step 1: Login to GST Portal

Go to GST Portal and log in with your credentials.

Step 2: Navigate to ITC-02 Form

Go to:
Services → Returns → ITC Forms → GST ITC-02 → Prepare Online

 

Step 3: Fill in the Details

• Enter GSTIN of the transferee.
• Enter the amount of ITC to be transferred (for each head: CGST, SGST, IGST, CESS).
  

Step 4: Upload CA Certificate

• Add CA firm name, CA name, membership number, and certificate date.
• Upload the certificate (PDF/JPEG, max size 500 KB).
  

Step 5: Save and File the Form

• Click SAVE to store the form.
• Select authorized signatory.
• File the form using DSC or EVC (we’re using EVC here for simplicity).
  

 

Step 6: Confirmation

• Enter the OTP sent to the authorized signatory’s mobile.
• Submit the form and download the acknowledgment (ARN).
  
  

 

Step 2: Actions by the Transferee (New Business)

Step 1: Login to GST Portal

Use your GST credentials to log in.

Step 2: Go to Pending ITC Transfers

Navigate to:
Services → User Services → ITC-02 – Pending for actions

 

Step 3: View ITC Transfer Details

• Click on the ARN link to view transfer details.
• You’ll see amounts available under each head.
  

 

Step 4: Accept the Transfer

• Click ACCEPT and proceed.
• Declare information is correct, select authorized signatory.
• File using DSC/EVC (again using EVC here).
  

 

Step 5: Confirmation

• Enter OTP received.
• You’ll get a success message, and the status will change to Accepted.

 

Quick Summary

Step	Who Performs	Description
1	Transferor	File ITC-02 with ITC details and CA Certificate
2	Transferee	Accept the ITC on GST Portal
3	System	Transfers ITC and updates both Electronic Credit Ledgers

 

 

Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.

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