TRANSFER OF ITC THROUGH ITC-02

Save Share

This query is : Resolved

Quick Summary

This discussion explores the complexities of transferring Input Tax Credit (ITC) from a Hindu Undivided Family (HUF) to a newly formed partnership firm. It clarifies that an HUF cannot be merged with a partnership firm and that such a transfer is treated as a sale of a going concern, potentially attracting capital gains tax. The advice suggests issuing a tax invoice and entering into a backdated business transfer agreement to facilitate the ITC transfer via Form ITC-02, even if the HUF's bank account is closed.

Jayesh Bhinde

Jayesh Bhinde (Querist)
Follow

25 August 2021 Facts of the Case:
Mr. A (HUF) was running Business with GST No....

A new Partnership Firm "ABC Co." was incorporate, in which Mr. A (HUF) has become a partner. New GST Number of Partnership firm has been taken with mentioned that "Change in Constitution of Business ".And GST Details of Mr. A (HUF) was mentioned thereunder.
Mr. A (HUF) has a GST credit lying in his Credit ledger which he wants to transfer via Form RFD-01 and ITC-02.
Previous CA Considered it as a merger from Mr.A (HUF) to partnership Firm, and he gets Bank Account closed of Mr.A (HUF), and transfer all balance sheet in Tally Via JV to consider it as a capital contribution of Mr. A (HUF) in new Partnership Firm i.e. ABC Co.

Difficulties Faced by Me:
1) Whether HUF can be merger with partnership firm?
2) Capital gain tax liability of Mr.A (HUF).
3) How all balance sheet transfer in tally specially the stock lying with Mr. (HUF)
4) There is any risk in Certifying RFD 01, ITC-02 and Tax Audit Both new and old.
5) Can we transfer ITC via sale from Mr.A (HUF) to partnership firm?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
Follow

25 August 2021 1 No, HUF can't be merged.
2 Capital gains tax liability arising on sale.
3 Transfer it as sale.
4 Certify in case of sale.
5 yes in case of sale.

Jayesh Bhinde

Jayesh Bhinde (Querist)
Follow

25 August 2021 Respected CA R SEETHARAMAN Sir,

Thank you very much for your valuable feedback. if we consider it as a sale of going concern business, how can we transfer balance of GST credit in new partnership firm? because Mr. A (HUF) has closed his bank account. hence in case of sale, partnership firm can take input of GST without paying Purchase amount to Mr. A (HUF)?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
Follow

26 August 2021 Raise tax invoice and pay for purchase amount to claim ITC.

CA Altamush Zafar

CA Altamush Zafar (Expert)
Follow

27 August 2021 Firstly enter into a transfer of business agreement. But this will have to be done from the back date.
Transfer of business as going concern is exempt under GST.
ITC can be transferred through ITC-02 in case of transfer

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now