Seeks to clarify issues in respect of apportionment of input tax credit (ITC) in cases of business reorganization under section 18 (3) of CGST Act read with rule 41(1) of CGST Rules

Last updated: 24 March 2020

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This circular clarifies how Input Tax Credit (ITC) should be apportioned and transferred when a business undergoes reorganisation, such as a merger, demerger, or change in ownership. It addresses taxpayer queries regarding Section 18(3) of the CGST Act and Rule 41(1) of the CGST Rules. The aim is to provide clear guidance on these complex scenarios.

Circular No.133 03/2020-GST

F.No. CBEC-20/06/13/2019-GST

Government of India

Ministry of Finance

Department of Revenue

Central Board of Indirect Taxes & Customs

GST Policy Wing

***

New Delhi, dated the 23rd March, 2020

To,

The Principal Chief Commissioners/Chief Commissioners/Principal Commissioners/ Commissioners of

Central Tax (All) / The Principal Director Generals/ Director Generals (All)

Madam/Sir,

Sub: Clarification in respect of apportionment of input tax credit (ITC) in cases of business reorganization under section 18 (3) of CGST Act read with rule 41(1) of CGST Rules - reg.

Representations have been received from various taxpayers seeking clarification in respect of apportionment and transfer of ITC in the event of merger, demerger, amalgamation or change in the constitution/ownership of business. Certain doubts have been raised regarding the interpretation of subsection (3) of section 18 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act) and sub-rule (1) of rule 41of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the CGST Rules) in the context of business reorganization.

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FAQ :

The circular aims to clarify issues concerning the apportionment and transfer of Input Tax Credit (ITC) when a business undergoes reorganisation like merger, demerger, or change in ownership.

The clarification is in respect of Section 18(3) of the CGST Act, read with Rule 41(1) of the CGST Rules.

The circular covers reorganisations such as merger, demerger, amalgamation, and any change in the constitution or ownership of a business.

Representations have been received from various taxpayers seeking clarification on the apportionment and transfer of ITC in cases of business reorganisation.

This circular was issued on the 23rd March, 2020.