ITC-02 is a form used for transferring the Input Tax Credit (ITC) balance in the electronic credit ledger of a GSTIN to another GSTIN due to mergers and acquisitions.
What is ITC-02 and who must file it?
In case of transfer of business by way of sale of business, merger or demerger, a registered taxpayer can transfer the input tax credit unutilised and available in his electronic credit ledger into another business by filing a declaration in Form GST ITC-02.
It must be filed by the transferor and action must be taken by the transferee. There is no time limit specified under the Act or Rules. The entire treatment of GST in such cases can be understood from our article- ‘GST on the transfer of business’.
Need to file ITC-02
Multiple amalgamations, mergers, and demergers have taken place after the implementation of GST. In such cases, a transferor of business will have unutilised ITC lying in the electronic credit ledger. He can transfer this ITC to the new business only by filing GST ITC-02. On filing GST ITC-02, the unutilised credit of the transferor will get transferred to the electronic credit ledger of the transferee.
Format and contents of ITC-02
The following is the format of the form ITC-02:
Contents of Form GST ITC-02 are as given below:
Provide the basic details like GSTIN, trade name and legal name of the transferor and transferee.
ITC transfer details
Provide the details of total ITC available and the amount of ITC to be transferred under each major head.
CA/Cost Accountant details
Provide the details of certifying CA or a Cost Accountant.
How to file ITC-02 on the GST portal?
There are certain pre-requisites for filing Form GST ITC-02:
- The transferor, as well as transferee of business, should have a valid GST registration.
- The transferor should have ITC available in the electronic credit ledger.
- The transferor should file all the applicable GST returns of the past periods.
- All the pending transactions related to the merger should be accepted, rejected, or modified. Also, all the liabilities related to past returns of the transferor should be paid off.
- The transfer of business should be done with an accurate provision for transfer of liabilities on account of stayed demand of tax, litigation, recovery, etc. The same should be certified by a Chartered Accountant or a Cost Accountant.
The process of transferring unutilised ITC is divided into two parts:
- The transferor files GST ITC-02 stating the unutilised ITC.
- The transferee accepts/rejects the same on the GST portal, covered in the last section.
The below steps are to be taken by the transferor.
Step 1: Log in to the GST Portal.
Step 2: Navigate to Services>Returns>ITC Forms. to open ITC-02.
Click on the ‘Prepare Online’ button on the ITC-02 tile as given below:
Step 3: Enter details of the transferee
Update the GSTIN of the transferee and enter the amount to be transferred under each major head.
The Form GST ITC-02 will open up and the amount of unutilised ITC will get auto-populated in the form from the electronic credit ledger. The transferor can transfer the entire amount or partial ITC, as the case may be.
Step 4: Update the following details of certifying Chartered Accountant or a Cost Accountant:
- Name of the certifying firm
- Name of the certifying Chartered Accountant or a Cost Accountant
- Membership number of the certifying firm
- Date of issue of the certificate
Also, attach a copy of the certificate and then click ‘Save’.
On clicking the save button, a message will pop up stating that the details are saved successfully.
Step 5: Proceed to file using either EVC or DSC.
Check the declaration checkbox and select the authorised signatory from the drop-down list.
File the form by using the DSC or EVC option, as given below:
Click ‘Proceed’ on the warning message. Enter the OTP and click ‘Verify’. A confirmation message will pop up.
What must be done after filing Form ITC-02?
After filing of Form GST ITC-02 by the transferor, the transferee can either accept or reject the transfer. He should perform the below steps:
Step 1: Log in to the GST portal and navigate to Services>User Services>ITC-02 Pending for action. The form will open.
Step 2: Click on the ARN. The details filed will be displayed.
Step 3: The transferee can accept or reject the transfer.
If the transferee clicks ‘Accept’, a confirmation message will pop-up. The transferee can click on the declaration checkbox, select the authorised signatory and then proceed to file with DSC or EVC.
On a successful transfer, a confirmation message will pop-up.
The transferee can go to the ITC-02 pending for action screen to confirm that the status changed to ‘Accepted’.