The Gujarat High Court has ruled in favor of Emerson Process Management (India) Pvt. Ltd., allowing the transfer of Input Tax Credit (ITC) across states following a company amalgamation. The case arose when Emerson, after merging with another company and obtaining NCLT approval, inherited unutilized ITC, including credits from before the GST regime. However, attempts to transfer this ITC through Form GST ITC-02 were thwarted by the GST portal, which mandated that both the transferor and transferee be located in the same state.
Emerson approached the High Court after repeated efforts to resolve the issue with authorities failed. The petitioner contended that neither Section 18(3) of the CGST Act nor Rule 41 imposed such a restriction on inter-state ITC transfers post-amalgamation. The key issue was whether ITC could be transferred between entities in different states despite the portal's restrictions.
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The Court determined that the statutory provisions did not limit inter-state ITC transfers in amalgamation scenarios. It declared the GST portal's requirement for same-state entities as invalid and emphasized that administrative or technical constraints, such as portal errors, cannot undermine the substantive rights granted by the statute. The Court directed the authorities to accept manual filings of Form ITC-02 and facilitate the ITC transfer within six weeks, pending the development of suitable system mechanisms.
Order Date - 05 March 2026
Parties: EMERSON PROCESS MANAGEMENT (INDIA) PVT LTD Vs UNION OF INDIA & ORS.
Facts -
- Emerson Process Management (India) Pvt. Ltd., after amalgamating another company via NCLT approval, inherited its unutilized ITC, including credits carried forward from the pre-GST regime.
- The Petitioner attempted to transfer such ITC through Form GST ITC-02, but the GST portal rejected it citing that transferor and transferee must be in the same state.
- Despite repeated follow-ups and reminders to authorities, no resolution was provided, forcing the Petitioner to approach the High Court.
- The Petitioner argued that neither Section 18(3) of the CGST Act nor Rule 41 restricts ITC transfer across states post-amalgamation.
Issue -
- Whether ITC can be transferred between entities located in different states after amalgamation, despite GST portal restrictions?
Order -
- The Court held that statutory provisions do not restrict inter-state ITC transfer in cases of amalgamation.
- The GST portal’s condition requiring same-state entities is not backed by law and is therefore invalid.
- Administrative or technical limitations (like portal errors) cannot defeat substantive legal rights granted under the statute.
- Authorities were directed to accept manual filing of Form ITC-02 and process ITC transfer within 6 weeks, until proper system mechanisms are developed.
