{"id":10093,"date":"2020-06-04T12:44:31","date_gmt":"2020-06-04T07:14:31","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=10093"},"modified":"2023-03-06T16:11:32","modified_gmt":"2023-03-06T10:41:32","slug":"apportionment-of-itc-in-cases-of-business-reorganization","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/apportionment-of-itc-in-cases-of-business-reorganization\/","title":{"rendered":"A Study on Apportionment of ITC in Cases of Business Reorganization"},"content":{"rendered":"\n

With regard to the apportionment\nof ITC <\/em><\/strong>in cases of business reorganization<\/em><\/strong>, CBIC has\nprovided circulation by issuing a Circular No. 133\/2020<\/em><\/strong>– GST\ndated March 23, 2020<\/em><\/strong>, in the eventuality of amalgamation or change in\nthe business ownership\/constitution, merger or demerger. Through this circular,\nCBIC has provided a clear picture to numerous taxpayers. <\/p>\n\n\n\n

Representations were received from\nthe several taxpayers asking for clarification with reference to the\napportionment of ITC in cases of business reorganization (during the hours of amalgamation<\/em><\/strong>\nor change in ownership\/constitution of business<\/em><\/strong>, merger<\/em><\/strong> as well as demerger<\/em><\/strong>)\nThe provisions concerning the apportionment of ITC in cases of business\nreorganization(post-merger<\/em><\/strong> or demerger)<\/em><\/strong> are carrying lack of\nclarity of provisions of the law since it is a subject of complexities that\ndemands in-depth introspection. <\/p>\n\n\n\n

The merger<\/strong><\/em> is\nthe unification<\/strong><\/em> of two or more than two corporations<\/strong><\/em> that\nencompass the transfer of all assets, liabilities, as well as the stock\nof Transferor Company<\/strong><\/em> to Transferee Company<\/strong><\/em> and Transferee Company<\/strong><\/em>,\nissues shares in the form of consideration. A business strategy in which transfer\nof business undertakings takes place from one company to another company is\nknown as Demerger<\/strong><\/em>. <\/p>\n\n\n\n

Demerged<\/strong><\/em> company<\/strong><\/em> is the company that is responsible for transferring such business undertakings while the resulting company<\/strong><\/em> is the company to whom the business gets transferred. An acquiring company<\/strong><\/em> issues shares to the shareholders related to the selling company in the form of consideration.<\/p>\n\n\n\n

Apportionment of ITC in Cases of Business\nReorganization – <\/strong>Issues\nand Clarifications Related to M&A Transactions <\/h2>\n\n\n\n

Concerning the interpretation of section 18-subsection 3 of the CGST Act, 2017<\/strong><\/em>, and Rule 41(1)<\/em><\/strong> of the CGST Rules, 2017, in the connection of business reorganization, doubts have arisen.<\/p>\n\n\n\n

Whether the value of assets of new units would get the consideration at\nAll-India level or State-level for apportionment of input tax credit?<\/h3>\n\n\n\n