Prepare the GST credit evidence for an Indian business transfer using ITC-02

Transferring an accounting balance after an Indian business acquisition does not itself transfer the seller's unutilized GST credit. The GST Portal describes ITC-02 as the process for specified sales, mergers, demergers and other business transfers. Its conditions include GST registration of both entities and a specific provision for transferring liabilities.

Obtain the executed agreement and ask the legal and tax advisers to identify the relevant liability clause. The portal requires an accompanying certificate from a practicing chartered accountant or cost accountant. Keep the certificate tied to the actual entities and transaction. A draft deal summary or a finance manager's internal memo does not replace that certificate.

Download the transferor's electronic credit ledger and retain its date, registration and balances by tax head. Compare those figures with the GST control accounts and the transaction's proposed transfer schedule. Explain return postings, reversals, claims and other movements between the deal's effective date and the filing snapshot.

List the amount proposed for each applicable tax head without combining all credits into one unexplained number. Record any difference between the accounting ledger and the portal balance as an exception for the tax reviewer. A receivable shown in the books may not represent credit available for transfer through the portal.

The GST Portal also calls for the transferor's past returns and relevant liabilities to be addressed. Ask the adviser to confirm readiness from the actual filing and demand records. Do not infer that the transfer conditions are satisfied merely because the parties have signed the acquisition documents or paid the purchase price.

A demerger needs particular attention. The portal explains that the transfer is apportioned using the asset-value ratio specified by the demerger rules. Give the adviser the scheme, valuation schedules and entity-level asset evidence, then retain the approved tax apportionment. Avoid substituting the purchase-price allocation or an informal percentage supplied by the deal team.

For a straightforward transfer, prepare a matching schedule of the inputs and capital goods passing to the recipient, with their source records and accounting references. Explain items retained by the transferor and assets moving under a different arrangement. The receiving finance team should be able to distinguish physical or operational transfer from the separate tax-credit process.

Assign an authorized owner in each entity to the filing and acceptance steps. Save the submitted ITC-02, certificate, acknowledgment and the transferee's recorded decision. The portal says accepted credit is reflected in the transferee's electronic credit ledger; a rejected request does not complete the transfer. Check the resulting balances before closing the issue.

Reconcile the approved transfer amount to the movement out of one entity and into the other. Have the accountants record the appropriate entries in their respective books, using the same transaction reference. Keep rejected requests, later submissions and correspondence in sequence so an old attempt cannot be mistaken for the completed transfer. Leave any difference visible in the acquisition exception log until both entities can explain it.