Transfer of ITC between GSTIN within same state - Step wise Process (Form ITC-02A)

In this article, Author have tried to simplified the process of filing the form ITC-02A, from one GSTN No. to another GSTN No. of  a "Registered Person" having same PAN.

Need of introducing this new Form ITC-02A by GST department. 

It is possible that before a branch is set up within the same state, the capital goods, inputs or input services meant for that new branch are purchased by head office (principal place of business) would have already claimed ITC on such capital goods, inputs or input services.  

Such ITC claims ideally belong to the branch since, it ultimately consumes or uses the capital goods, input services or inputs. Thus, the Form GST ITC-02A is used to transfer such unutilized ITC to the newly established branch.

The method of ITC transfer is similar to the distribution of ITC by ISD, but within the same state/Union Territory and based on asset distribution.

Before going into this deeper, first we will analyse the section 25(2) of CGST act where the abstract of the section is as follows:

“A person seeking registration under this Act shall be granted a single registration in a State or Union territory:

Provided that a person having multiple places of business in a State or Union territory may be granted a separate registration for each such place of business, subject to such conditions as may be prescribed.”

The important part of this proviso, where it says, if a person wants to take separate registration within same state for different business verticals, he can take.      

For Example, let's say Mr. A is having registration in Delhi state and at same time he is planning to set up another business where the risks and rewards from the new business was entirely different from the earlier one. He can take separate registration in Delhi itself as it is permitted by proviso to section 25(2).

Following points should be kept in mind while transferring the matched ITC available:

·       Amount of matched ITC available: The amounts in this column are auto-populated.

Having unutilized balance in Electronic Credit Ledger may not be enough. The same should also be matched, i.e. the respective supplier should have also uploaded the invoice details in GSTR-2A against which ITC is claimed.

The ITC rules allows the claim of provisional ITC up to 10% of the eligible ITC in GSTR-2A. Such ITC can’t be transferred.

·    Calculation of matched ITC transferred: As per Proviso the Rule 41A, ITC shall be transferred to the newly registered entities in the ratio of assets held by them at the time of registration.

It is to be noted that, value of assets means, Value of entire assets of the business (whether or not input tax credit has been availed thereon)

For better understanding purpose an example as follows:

ITC available in business 1 is Rs. 5,00,000/-

Assets X value is Rs. 10,00,000/- (ITC was not availed and ITC portion was capitalized and added to asset value),

Assets Y value is Rs. 15,00,000/- on which ITC has been taken. (Assets Y was transferred to new business 2)

Now ITC can be transferred to business 2 be

= 5,00,000 X 15,00,000/25,00,000 = Rs. 3,00,000/-

Note: ITC can be transferred or received separate each major head wise and not on cumulative basis. It means Proportionate of IGST/SGST/CGST of each head to be calculated separately.

How to file Form ITC-02A on the GST portal ?

The transferor must follow the below steps.

Step 1: Log in to the GST Portal with valid login credentials and navigate to the ITC-02A page.

From the homepage, go to Services ➡️ Returns ➡️ ITC Forms

Click on ‘Transfer ITC’ on the ‘GST ITC-02A’ tile, as given below:

Step 2: Enter the necessary details of ITC to be transferred.

Enter the GSTIN of the transferee. It will auto-populate the ‘Transferee Legal Name’ and ‘Transferee Trade Name’. 

Enter the amounts in the ‘Amount of matched ITC to be transferred’ column and click on ‘Save’.

A confirmation message saying ‘Details saved successfully’ will be displayed.

Step 3: Preview form ITC-02A before filing.

Click on the ‘Preview Draft GST ITC-02A (PDF)’ button to view the filled-up draft form.

Step 4: File Form ITC-02A either using EVC or DSC.

Choose the declaration checkbox. Select the authorised signatory from the drop-down list and click on the ‘File ITC with EVC’ or the ‘File ITC with DSC’ button, whichever applicable.

If ‘File ITC with DSC’ button is selected, choose the digital signature and click on the ‘Sign’ button.

If ‘File ITC with EVC’ is selected, enter the OTP sent on the registered email address and mobile number.

• A warning message will be displayed. Click on ‘Proceed’.
• A message confirming successful submission appears along with the ARN. The filed form can also be downloaded in PDF format.
• The Electronic Credit Ledger will be debited with the amount of transfer.

What transferee should do?

Step 1 – Login to GST Portal using transferee login credentials.

Step 2 – Select the “ITC Form” in the Return Option of the Services Tab.

Step 3 – Select the ITC-02A form and then click on the ‘Take Action’ Tab.

Step 4 – Verify the details provided and select accept- Once you select accept a confirmation message of acceptance will reflect. Thereafter Select the check box for declaration and select authorised signatory- Select “File ITC with EVC” or “File ITC with DSC” (whichever option is preferable).

Step 5 – Verify in the Credit Ledger whether the ITC has been credited to the transferee and the same has been debited from the transferor.

How this benefitted to registered person

Earlier scenario, where ITC-02A was not enabled, credit availed by the transferee (Prior Scenario of ITC-02A):

1.     Transferor used to book sales entry to Transferee, where it unnecessarily increases Turnover without actual sales made (because both Transferee and Transferor units are of single person) – Now this type of Transactions will be ended.

2.     The cost of booking sales transaction is also high – how ??

We will understand this by our earlier example to transfer the credit of 3,00,000/- and entity was dealing in GST rated goods of 5% then transferor needs to book sale of 3,00,000/5% = 60,00,000/-

which drastically increases turnover in the books and leads to unnecessary complications like GST Departmental Audit and compliance with GSTR 9C and some other sections of the GST act where the turnover limits are the criteria for enabling such provisions.

Author’s Comment: GST ITC-02A Form will enable seamless flow of credit within the same organisation.

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DISCLAIMER : THE ENTIRE CONTENT OF THIS DOCUMENT HAVE BEEN PREPARED ON THE BASIS OF RELEVANT PROVISIONS AND AS PER THE INFORMATION EXISTING AT THE TIME OF PREPARATION. THOUGH UTMOST EFFORTS HAS MADE TO PROVIDE AUTHENTIC INFORMATION, IT IS SUGGESTED TO HAVE BETTER UNDERSTANDING. KINDLY CROSS CHECK THE RELEVANT SECTIONS AND RELATED RULES TO IT. THE OBSERVATION OF THE AUTHOR ARE THE PERSONAL VIEW AND AUTHOR DO NOT TAKE RESPONSIBILITY OF THE SAME. IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT AND INDIRECT RESULT FROM THIS ARTICLE. THIS IS ONLY A KNOWLEDGE SHARING INITIATIVE.  

THE AUTHOR - CA ASHU BANSAL (ASSOCIATE PARTNER AT AMKV & ASSOCIATES) 

CAN BE REACHED AT | CAASHUBANSAL5@GMAIL.COM | M: 9034674871 |