In a significant ruling, the Bombay High Court addressed the issue of transferring Central Goods and Services Tax (CGST) credit between entities, irrespective of whether the transactions are intra-state or inter-state. The case involved Autocat India Private Limited, which faced difficulties in transferring Input Tax Credit (ITC) from a transferor company due to a technical error on the GSTN portal. The portal rejected the transfer attempt, citing that the transferor and transferee should belong to the same state or union territory.
The court examined whether this technical error violated the petitioner's rights. It underscored that the Goods and Services Tax (GST) system is designed to be a seamless, destination-based tax that eliminates the cascading effect of taxes. Therefore, the court ruled that CGST credit should be transferable irrespective of the geographical nature of the supply, aligning with the legislation's intent to maintain a continuous chain of tax credits from production to retail.
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However, the court acknowledged complications with the State Goods and Services Tax (SGST), as it is collected and utilized by the individual states. In this case, transferring SGST credits from Maharashtra to Goa could result in financial discrepancies. The petitioner's counsel agreed to forgo the transfer of unutilized SGST credits amounting to Rs.1,39,285, thus resolving the issue without causing financial loss to the state of Goa. This ruling emphasizes the importance of facilitating seamless tax credit transfers to uphold the GST system's foundational principles.
Order dated10 July 2025
Parties: Autocat India Private Limited v. Union of India & Ors.
Facts –
- The Transferor Company had credit in its credit ledger when it was amalgamated with the Transferee Company and the credit was reflected in its electronic credit ledger. The Transferor Company made an attempt to file the prescribed form, GST ITC-02 on the GSTN portal to transfer the entire ITC from the Transferor Company to the Petitioner.
- However, the same was rejected with an error message “Transferee and Transferor should be of the same State/UT”. The Transferor Company made a representation to the State Tax Officer on 17.08.2020 and received a reply on 06.10.2020 stating that they do not have the option or feature in their system to resolve the technical issues faced by it on the GSTN portal.
Issue -
- Whether the error caused in GSTN portal violates the petitioner's right?
Order -
- The division bench of the Hon’ble high court held that since the imposition of GST is based on the transaction value of products and services, both components operate at the same time as they are destination based tax consumption. The intention of the law makers in bringing the legislation and providing ITC was with a specific object i.e. to provide a continuous chain of set off from original producers’ point and the service providers' point up to the retailers' level and thus eliminate the burden of tax cascading. The credit of CGST output liability, if it is to be availed seamlessly, it shall be allowed to be availed, irrespective of intra State or inter State supply.
- There appears to be some issue about SGST, as the SGST is to be collected by the State and it will be consumed by the State and permitting the SGST to be utilized in the State of Maharashtra would result in financial loss to the State of Goa, but since the learned Counsel for the Petitioner, has instructions to make a categorical statement that as far as the un-utilized SGST in the sum of Rs.1,39,285/- is concerned, he will give up his claim for its transfer.
