11 July 2024
Section 53 of the Central Goods and Services Tax (CGST) Act, 2017 deals with the transfer of input tax credit (ITC) when there is a change in the constitution of a registered person due to sale, merger, demerger, amalgamation, lease, or transfer of the business. Here’s a summary of what Section 53 entails:
1. **Conditions for Transfer**: When there is a change in the ownership or business structure that results in the transfer of liabilities, including the transfer of ITC, the registered person (transferor) and the transferee must jointly intimate the tax officer about such transfer within 30 days from the date of transfer or succession.
2. **Transfer of Unutilized ITC**: The unutilized ITC lying in the electronic credit ledger of the transferor shall be transferred to the transferee. This ensures that the ITC is not lost during business transfers but is effectively carried forward to the new entity.
3. **Procedure**: The procedure for transfer involves filing an application for transfer of unutilized ITC to the tax officer, specifying the details of the transferee and the ITC to be transferred.
4. **Liability for Tax**: The transferor and transferee are jointly and severally liable for any tax, interest, or penalty payable, where applicable, up to the date of transfer or succession.
5. **Other Provisions**: Section 53 also includes provisions for de-registration in case the transferee is not eligible for registration under GST or fails to apply for registration within 30 days from the date of transfer.
In essence, Section 53 of the CGST Act facilitates the seamless transfer of unutilized ITC in case of business transfers to ensure continuity and compliance under the GST regime. It aims to prevent the loss of ITC and ensures that the tax system remains robust during changes in business ownership or structure.
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