Although the GST law is silent on cross-State ITC transfers in mergers, this should not obstruct businesses from claiming rightful credits, says court.
The Bombay High Court, Goa Bench has requested the Goods and Service Tax Council and Goods and Service Tax Network (GSTN) to provide a mechanism to enable cross-state Input Tax Credit (ITC) transfer in mergers and amalgamations.
The bench of Justice Bharati Dangre and Justice Nivedita P. Mehta has permitted the IGST and
CGST amount lying in the electronic credit ledger of the Transferor Company to be transferred to the Petitioner Company by physical mode for the time being, subject to the adjustments to be made in future.
The bench emphasized the need for a mechanism to permit the seamless movement of unutilised IGST and CGST credits from a transferor company to a transferee company operating in another State.
“We approve the transfer of IGST and CGST balances from the electronic credit ledger of the transferor company to that of the transferee, subject to necessary adjustments in the future,” the bench stated.
The Petition filed by the Umicore Autocat India Private Limited has raised a challenge to the action of the Respondents in restricting the transfer of the un-utilized Input Tax Credit [ITC] on account of merger/amalgamation, under Section 18(3) of the Central Goods and Services Tax Act, 2017 on the ground that the transfer is prohibited where it involves two distinct States.
The case arose from a merger where the petitioner company had taken over all liabilities of the transferee company, located in Maharashtra. However, the lack of a provision allowing ITC transfer across States posed a major challenge. The petitioner sought to utilize the unutilised ITC lying in Maharashtra in its operations in another State.
The Petitioner, therefore, seeks a direction to the Goods and Services Tax Network to allow the transfer of credit between the Transferor and the Petitioner Company that neither Section 18(3) of the CGST Act 2017 nor Rule 41 of the Central Goods and Services Tax Rules, 2017, impose any such restriction.
The petitioner invited attention to the CGST Rules of 2017 and in particular, Rule 41, which has set out the procedure for transfer of credit on sale, merger, amalgamation, lease or transfer of business, he would submit that the section imposes no restriction on the ITC, which is permitted to be transferred as projected by the Petitioner to a new entity, which has come into existence on amalgamation just because it is located in different State.
The department opposed the reliefs claimed in the Petition and according to him, Section 16 of the CGST Act, 2017 has determined the eligibility and conditions for awaiting the ITC and according to him, this benefit is available to every registered person, who is entitled to take credit of input tax filed, charged on supply of goods or services or both, which are used or intended to be used in the course of furtherance of his business and such amount shall be credited to the electronic credit ledger of such a person.
The bench observed that under Section 18(3) of the CGST Act, 2017, ITC transfer is permissible in specific cases like mergers, demergers, and amalgamations. The court also noted that while IGST and CGST are collected by the Centre and their redistribution remains unaffected, transferring SGST would impact the revenue of individual States.
Despite this, the bench remarked that in cases where ITC remains unutilised in one State due to business reorganization, it would be unjust to deny its use in another. “The transferee company is entitled to claim such credit, especially when all liabilities are also assumed,” it said.
The court clarified that although the GST law is silent on cross-State ITC transfers in mergers, this should not obstruct businesses from claiming rightful credits. It emphasized the importance of updating the GSTN system to accommodate such transitions.
“It can no longer be ignored that GST, being a unified tax scheme, must evolve to address such genuine business contingencies,” the judges concluded.
Case Details
Case Title: Umicore Autocat India Private Limited Versus Union of India
Case No.: Writ Petition No. 463 Of 2024
Date: 10th July 2025
Counsel For Petitioner: Avinash Poddar with Vibhav Amonkar
Counsel For Respondent: Asha Desai, Senior Standing Counsel
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