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2021 (8) TMI 672 - AAR - GSTValuation - De-merger - transfer of MIS business to a resulting company - inclusion of assets which are outside the purview of GST, in the value of assets for the purpose of apportionment towards transfer of input tax credit in case of de-merger in terms of Section 18(3) of CGST Act, 2017 read with Rule 41(1) of CGST Rules, 2017 - determination of value of assets for apportionment towards transfer of input tax credit in case of de-merger in terms of Section 18(3) of CGST Act, 2017 read with Rule 41(1) of CGST Rules, 2017 - whether the assets which are not attributable to any particular GSTIN be considered in the GSTIN of the head office of the Company for the purpose of computation of asset ratio? HELD THAT:- Whenever there is reconstitution of a registered person, by way of demerger, with a specific provision for transfer of liabilities, the said registered person is allowed to transfer the input tax credit which remains unutilized in his electronic credit ledger to the demerged businesses in the manner as may be prescribed - the manner in which the unutilized ITC should be as per the Rules made in this regard. It is clear from the proviso to the sub-rule (1) of Rule 41 of the CGST Rules, 2017 that the input tax credit shall be apportioned between the new units in case of a demerger in the ratio of the “value of assets” of the new units as specified in the demerger scheme. Value of assets - HELD THAT:- The explanation to the sub-rule (1) of Rule 41 of the CGST Rules states that the “value of assets” means the value of the entire assets of the business, whether or not input tax credit has been availed or not. The assets which are outside the GST also form the “assets” and is included in the scope of “entire assets” and hence the value of assets which are outside the purview of GST is required to be included in the value of assets for apportionment towards transfer of input tax credit in case of demerger in terms of Section 18(3) of CGST Act, 2017 read with Rule 41(1) of CGST Rules, 2017. Whether the assets which are created to comply with the requirements of accounting standards are also forming the part of the “entire assets” and hence are includible in the scope of “entire assets”? - HELD THAT:- The input tax credit shall be apportioned as per a ratio and that ratio is the ratio of the value of assets of the new units as specified in the demerger scheme. From the clarification given in the para 3(a) Board Circular No. 133/03/2020 dated 23.03.2020 it is noticed that if a company is having a 60% of its entire assets in a state and it transfers 20% of its assets to the demerged entity, the ratio for ITC apportionment would be 20/60. Hence the value of assets of the new units as per demerger scheme should be taken - It is not possible that some assets will not be transferred to the two units coming into existence as the same needs to be transferred to either of the units as per the demerger scheme. The proviso does not state any exclusion for the assets transferred or not transferred as part of the demerger and hence would include all assets. Whether the assets are a part of the balance sheet of any company and they have to be a part of either one or other GSTIN? - HELD THAT:- For the purpose of computation of asset ratio, the assets which are transferred to the new units has to be considered to the total assets which the company was maintaining in the particular state and accordingly ITC apportionment is to be calculated. This is also clarified in the clarification issued in question (a) in para 3 of Circular No. 133/03/2020 - GST dated 23.03.2020.
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