M/s. Suarj Vidyut (JV) is a Joint Venture in the form of AOP.
A new Partnership named M/S. Suraj Vidyut was created with two additional partners .New PAN and GSTIN also taken. There is a clause in partnership deed that Join venture will get converted into a Partnership firm w.e.f.- 01.04.2021.
Above said Joint venture has paid taxability of Rs. 3 Crores on Advance of Rs. 25 Crores.
Partnership firm has issued a Tax Invoice.
Question: (A) Whether Partnership Firm can get transferred Un-Utilized Input Tax Credit (ITC) from Joint Venture through ITC-02.
(B) Whether partnership firm can adjust liability of outward taxability in GSTR-1 with tax paid on advance amount received in Suraj Vidyut (JV).
Pls suggest any other alternative way to cater this issue.
06 July 2024
In the scenario described, the conversion from a Joint Venture (JV) in the form of an Association of Persons (AOP) to a Partnership Firm (M/S. Suraj Vidyut) raises questions about the transfer of Input Tax Credit (ITC) and adjusting liability for tax paid on advances. Let's address each question:
**A. Transfer of Un-Utilized ITC from Joint Venture to Partnership Firm (M/S. Suraj Vidyut)**
1. **ITC-02 Transfer**: According to GST rules, when there is a transfer of a business from one entity to another (such as from a JV to a new partnership firm), the unutilized ITC can be transferred using Form GST ITC-02. This form is used to transfer ITC balance available in the Electronic Credit Ledger of the transferor (JV) to the transferee (partnership firm) at the time of business transfer. Since the conversion is recognized from April 1, 2021, this transfer should ideally be done soon after that date to ensure correct reporting and utilization.
2. **Conditions**: The transfer of ITC through ITC-02 is subject to certain conditions, including: - Both the transferor and transferee must be registered under GST. - The transferor must have filed all GST returns for the preceding six months. - The transferee must have obtained the registration voluntarily or mandatorily. - The ITC must be eligible for transfer under GST laws and rules.
**B. Adjusting Liability in GSTR-1**
1. **Tax Paid on Advance**: If the JV has already paid tax on the advances received (Rs. 3 crores on Rs. 25 crores), the partnership firm (M/S. Suraj Vidyut) can adjust this liability against its outward tax liability in GSTR-1.
2. **Invoice Issuance**: Ensure that the partnership firm issues tax invoices correctly reflecting the GST paid on the advances received. The invoices should be issued in accordance with GST rules, including the details required for tax paid on advances.
**Alternative Considerations**
1. **Consultation**: It's advisable to consult with a GST professional or tax advisor to ensure compliance with GST laws and rules regarding the transfer of ITC and adjustment of tax liabilities.
2. **Documentation**: Maintain clear documentation of the business transfer, including the partnership deed, ITC transfer through Form GST ITC-02, and all relevant tax invoices and GST returns.
By following these steps and ensuring compliance with GST regulations, M/S. Suraj Vidyut should be able to effectively manage the transition of ITC and tax liabilities from the JV to the partnership firm.
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