No Stay On Bombay HC’s Order Allowing Inter-State Transfer of Unutilised GST ITC After Amalgamation; SC Issues Notice

The Supreme Court did not grant stay but has issued the notice to the taxpayer against a SLP preferred by UOI against Bombay High Court judgment which allowed inter-State transfer of Input Tax Credit (ITC) in cases of merger / amalgamation. The Bombay High Court (Goa Bench) in Umicore Autocat India Private Limited v. Union of India & Ors. delivered a landmark ruling on 10 July 2025, holding that unutilised Input Tax Credit (ITC) can be transferred across States in cases of merger or amalgamation, notwithstanding technical limitations of the GST portal. The dispute arose after Umicore Anandeya India Private Limited, a Goa-registered entity, was amalgamated into Umicore Autocat India Private Limited, registered in Maharashtra, pursuant to a scheme sanctioned by the National Company Law Tribunal (NCLT), Mumbai. While the transferee company assumed all assets and liabilities of the transferor, the GST authorities denied transfer of accumulated ITC on the ground that the GST Network (GSTN) did not permit filing of Form GST ITC-02 when the transferor and transferee were registered in different States. At the time of amalgamation, the transferor company had substantial unutilised ITC reflected in its electronic credit ledger. However, when the prescribed form for ITC transfer was filed, the GST portal generated an error message stating that the “Transferee and Transferor should be of the same State/UT.” Despite representations made to GST authorities and GSTN, the issue remained unresolved, compelling the transferee company to approach the High Court. Legal Issue Before the High Court The principal legal question before the Court was whether Section 18(3 of the CGST Act, 2017, read with Rule 41 of the CGST Rules, 2017, restricts transfer of unutilised ITC only to intra-State mergers and amalgamations, thereby prohibiting inter-State transfers. Bombay High Court’s Findings A Division Bench comprising Justice Bharati Dangre and Justice Nivedita P. Mehta held that Section 18(3) does not impose any geographical restriction on transfer of unutilised ITC. Rule 41 only prescribes the procedure for transfer and cannot curtail statutory entitlement. GSTN portal limitations cannot override the substantive provisions of the CGST Act In an amalgamation, ITC must follow the business and its liabilities, irrespective of State boundaries The Court emphasised that GST was introduced to ensure a seamless flow of credit and to eliminate cascading of taxes, and therefore, any interpretation that blocks legitimate credit transfer defeats the core objective of the GST regime. Distinction from Earlier Madras High Court Ruling The Revenue relied on the Madras High Court decision in MMD Heavy Machinery (India) Pvt. Ltd., which denied cross-State credit transfer. However, the Bombay High Court distinguished the ruling, noting that it related to pre-GST CENVAT credit, involved a closed manufacturing unit, and arose under a different statutory framework. Relief Granted by the High Court The Court allowed transfer of IGST and CGST credits from the transferor to the transferee company. The petitioner voluntarily gave up its claim relating to SGST to avoid any potential revenue loss to the State of Goa. Recognising systemic shortcomings, the Court also directed the GST Council and GST Network to develop a suitable mechanism to enable inter-State ITC transfer in merger and amalgamation cases. Supreme Court Development: Notice Issued, No Interim Stay Following the Bombay High Court judgment, the Union of India filed a Special Leave Petition (SLP) before the Supreme Court challenging the ruling that permitted inter-State transfer of ITC in cases of merger and amalgamation. The bench of Justice Pamidighantam Sri Narasimhaand and Justice Alok Aradhe has issued notice to the taxpayer, Umicore Autocat India Private Limited, calling for its response. However, the Apex Court has not granted any interim stay on the operation of the Bombay High Court judgment. As a result, the High Court ruling continues to hold the field and remains binding unless stayed or set aside by the Supreme Court. Case Details Case Title: UOI Versus Umicore Autocat India Private Limited Case No.: 67126/2025 Date: 06/12/2025 Counsel For Petitioner: Avinash Poddar Counsel For Respondent: Asha Desai, Senior Standing Counsel Click Here To Read Bombay HC’s Order Read More: Composite GST SCN U/s 74 Invalid: Karnataka HC

No Stay On Bombay HC’s Order Allowing Inter-State Transfer of Unutilised GST ITC After Amalgamation; SC Issues Notice

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