GST Implications on Merger of Two GSTINs Having Same PAN

 In the case of Crystal Crop Protection Limited [GST-ARA-31/2021-22/B-50]. The AAR held that the transfer of business by way of merger of two GSTINs having same PAN would not qualify as ‘transfer of business as going concern’ and hence would constitute as supply of Goods and not supply of Services.

 

Facts

 

·                The Applicant has two GST registrations in Maharashtra and wishes to merge both the registrations by transferring the business of one to another without consideration.

 

Questions Involved

 

·                Whether transfer of business by way of merger of two GST registrations having same PAN would constitute as ‘supply’ under GST law? If yes, whether it would be treated as supply of goods or services?

 

·                Whether merger between distinct persons would qualify as ‘transfer of business as going concern’ under the GST Laws?

 

·                Whether transferor can file Form GST ITC-02 and transfer unutilized Input Tax Credit (‘ITC’) to transferee?

 

AAR Decision

 

·                The AAR observed that Schedule I of the CGST Act considers ‘supply of goods or services between distinct persons without consideration’ to be a supply. Thus, the transfer of business between two GST registrations having same PAN would be treated as supply.

 

·                The AAR further observed that to transfer the ITC under Section 18(3), there must be a change in constitution of the registered person. Since, in the present case, both the units hold same PAN, therefore, there is no change in constitution.

 

·                The AAR held that since there is no change in constitution, there cannot be any transfer by way of going concern and hence, the supply cannot be treated as supply of services but supply of goods.

 

·                For this reason, the AAR further held that ITC cannot be transferred between the units.

 

GABA & CO. | Remarks

 

·                In our humble view, the interpretation taken by the AAR may not be correct. Firstly, the AAR has interpreted the word ‘constitution’ in isolation. Secondly, the AAR has concluded that if there is no change in PAN, there cannot be any ‘transfer of business as a going concern’.

 

·                For limited purpose of GST, the law assumes and considers two registrations with same PAN as two different legal entities. Section 18(3) talks about ‘constitution of a registered person’. Under GST, there can be multiple registered persons within the same legal entity.

 

·                Thus, considering PAN as the basis for change in constitution of a registered person would be grossly illogical and goes against the very concept of ‘distinct persons’ under GST.