GST Portal Restrictions Can’t Override Statute: Gujarat HC Allows Cross-State Transfer Of CGST ITC After Amalgamation

The Gujarat High Court has held that the GST Department cannot deny transfer of unutilized Input Tax Credit (ITC) merely because the transferor and transferee entities are located in different States, observing that such a restriction does not exist under the CGST Act or Rules and cannot be introduced through the GST portal or statutory forms. The Bench of Justice A.S. Supehia and Justice Pranav Trivedi has criticised the manner in which the endorsement was reflected on the portal, observing that the opinion of the department had been “embossed” directly on the statutory form without any separate reasoned order or proper demarcation. The Bench stated that statutory forms issued under Rule 41 do not contain any provision authorising officers to record such restrictions or opinions within the form itself. BUY NOW: E-Magazine: 500 Landmark GST Judgments (2018–2025) The writ petition challenged the GST portal’s refusal to permit transfer of ITC pursuant to an NCLT-approved amalgamation scheme. The petitioner company was engaged in the manufacture and sale of safety valves and components and was registered under GST in multiple States including Gujarat, Maharashtra, Tamil Nadu, Karnataka and Andhra Pradesh. Pursuant to an amalgamation approved by the National Company Law Tribunal on 14 November 2019, another company merged into the petitioner, resulting in transfer of all assets and liabilities including accumulated ITC. The unutilized ITC primarily related to CGST credit carried forward from the erstwhile Central Excise regime through filing of TRAN-1 forms. However, when the petitioner attempted to transfer the credit by filing Form GST ITC-02 under Section 18(3) of the CGST Act read with Rule 41 of the CGST Rules, the GST portal displayed an error message stating: “Transferee and Transferor should be of the same State-U.T.” The petitioner argued that neither Section 18(3) of the CGST Act nor Rule 41 prohibited transfer of ITC between entities located in different States following amalgamation. It was further contended that the GST portal could not impose conditions absent from the statute itself. The petitioner also relied heavily on the Bombay High Court judgment in Umicore Autocat India Pvt Ltd v. Union of India, which had permitted such cross-State transfer of CGST and IGST credits. On the other hand, the department contended that the existing GST framework only permitted ITC transfers within the same State and that allowing inter-State transfer could create audit complications and increase the risk of tax evasion. The Department also informed the Court that the Bombay High Court ruling in Umicore Autocat had been challenged before the Supreme Court through a Special Leave Petition where notices had been issued. While examining the dispute, the Gujarat High Court made significant observations regarding the functioning of the GST portal and statutory forms. The Court noted that the GST Department had effectively incorporated a substantive restriction into Form GST ITC-02 by inserting the endorsement that transferor and transferee must belong to the same State or Union Territory. According to the Court, such incorporation was impermissible because the statute itself contained no such restriction. Relying extensively on the Bombay High Court’s ruling in Umicore Autocat India Pvt Ltd, the Gujarat High Court observed that the objective of the GST framework and ITC mechanism is to ensure seamless flow of credit and eliminate cascading of taxes. The Court agreed with the reasoning that denial of credit transfer solely because the entities are located in different States defeats the legislative intent behind Section 18(3) of the CGST Act. The Bench specifically held that neither Section 18(3) of the CGST Act nor Rule 41 of the CGST Rules prohibits cross-State transfer of ITC after amalgamation approved by the NCLT. It further held that the GST Department cannot introduce substantive restrictions through technological limitations or portal configurations when such restrictions are absent from the statutory framework. The Court observed that technological limitations of the GSTN portal cannot become a ground to deny substantive tax benefits granted under the law. It reiterated that administrative or software deficiencies cannot override statutory entitlements. The Court also took note of the fact that the ITC had already been manually transferred in the books of accounts pursuant to the NCLT-approved scheme of amalgamation. It held that denial of transfer through the GST portal was contrary to the approved scheme and inconsistent with the legislative framework governing business reorganisations under GST. The Gujarat High Court directed the GST Department to permit manual filing and processing of Form GST ITC-02 until a proper mechanism is developed on the GST portal. The Court ordered the authorities to process the petitioner’s manually filed form within six weeks. Case Details Case Title: Emerson Process Management (India) Pvt Ltd Versus Union Of India & Ors. Citation: JURISHOUR-1114-HC-2026(GUJ) Case No.: R/SPECIAL CIVIL APPLICATION NO.7006 of 2024 Date: 05/03/2026 Counsel For Appellant: Uchit N Sheth Counsel For Respondent: Shashvata U Shukla, Senior Standing Counsel Click Here To Read Order

GST Portal Restrictions Can’t Override Statute: Gujarat HC Allows Cross-State Transfer Of CGST ITC After Amalgamation

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