ITC Transfer After Amalgamation Allowed Despite Different State Registrations: Gujarat HC

The Gujarat High Court has ruled that input tax credit (ITC) cannot be denied merely because the transferor and transferee entities involved in a corporate amalgamation are registered in different states under the GST regime. The bench of Justice A. S. Supehia and Justice Pranav Trivedi has observed that the restriction cannot be imposed through a portal-generated endorsement when the statute itself does not prescribe any such limitation. The petitioner company, engaged in the manufacture and sale of safety valves and related components, operates across several states including Gujarat, Maharashtra, Tamil Nadu, Karnataka, and Andhra Pradesh. Pursuant to a scheme of amalgamation approved by the National Company Law Tribunal (NCLT) on November 14, 2019, Pentair Valves and Controls India Pvt Ltd merged into Emerson Process Management (India) Pvt Ltd. Following the merger, the entire business of the transferor company—including its assets, liabilities, and unutilised GST input tax credit—stood transferred to the petitioner as per the scheme. The ITC balance primarily related to credits transitioned from the earlier central excise regime through the filing of Form GST TRAN-1. To transfer this credit after amalgamation, the petitioner attempted to file Form GST ITC-02 as provided under Section 18(3) of the Central Goods and Services Tax Act, 2017 read with Rule 41 of the CGST Rules. However, the GST portal rejected the transfer with the message: “Transferee and Transferor should be of the same State/UT.” The petitioner argued that the GST law does not prohibit the transfer of ITC between entities located in different states following a merger or amalgamation. It contended that the portal’s restriction had no statutory backing and effectively introduced a condition that does not exist in the CGST Act or Rules. Counsel for the petitioner relied heavily on the decision of the Bombay High Court in Umicore Autocat India (P) Ltd v. Union of India, where the Court had permitted the transfer of ITC following amalgamation even when the companies were registered in different states. It was further submitted that Section 20 of the Integrated GST Act incorporates provisions relating to ITC under the CGST Act, thereby supporting the petitioner’s entitlement to transfer the credit. The GST authorities opposed the plea, arguing that the GST framework treats registrations in different states as distinct persons. According to the department, transfer of ITC across states could create audit challenges and increase the risk of tax evasion. The revenue also relied on a GST circular dealing with apportionment of ITC in cases of business reorganisation, asserting that cross-state ITC transfer was not contemplated under the existing system. The High Court observed that the GST authorities had inserted the objection directly within the statutory form on the portal without citing any legal provision supporting such a restriction. The bench held that statutory forms cannot be altered or supplemented with conditions that are not contemplated under the law. The Court also noted that embedding the department’s opinion within the form itself, rather than issuing a separate reasoned decision, made it difficult to trace the basis of the rejection. Referring to the Bombay High Court’s ruling in the Umicore Autocat case, the bench observed that when a company merges under a valid scheme of amalgamation approved by the NCLT and assumes all assets and liabilities of the transferor company, the benefit of ITC should ordinarily flow to the transferee entity. Case Details Case Title: Emerson Process Management (India) Pvt Ltd Versus Union Of India Citation: JURISHOUR-332-HC-2026(GUJ) Case No.: 05/03/2026 Date: 05/03/2026 Counsel For Petitioner: UCHIT N SHETH Counsel For Respondent: Shashvata U Shukla, Senior Standing Counsel Click Here To Read Order Read More: Unexplained Cash Deposits: ITAT Upholds Addition After Assessee Fails to Prove Source

ITC Transfer After Amalgamation Allowed Despite Different State Registrations: Gujarat HC

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