Transfer, reversal of ITC:

Section 16(8) of the MGL provides that on change in the constitution of a registered taxable person on account of sale, merger, demerger, amalgamation, lease or transfer of the business, transfer of unutilized ITC is allowed to the new entity. However, there is a caveat that terms of such change in constitution should also provide for specific provision for transfer of liabilities. In other words transfer of ITC is permitted only and only if both assets, including balance in electronic credit ledger, and liabilities are being transferred from the old entity to the new entity.

Section 16(12) of the MGL provides that the registered taxable person who has availed of ITC and have been paying taxes as normal taxable person, switches over to composition scheme, is required to pay an amount equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of switch over from the normal scheme to the composition scheme. It has been further provided that the amount can be paid by way of debit in the electronic credit or cash ledger. Likewise, where the goods or services supplied by a registered taxable person become exempt, he is required to pay in similar manner. It has also been provided that the balance of input tax credit, if any, lying in his electronic credit ledger shall lapse. Section 16 (13) of the MGL provides that the manner in which amount shall be calculated would be prescribed.

Section 16 (14) of the MGL provides for payment of tax when capital goods, on which ITC had been taken, are supplied. In such a situation, the registered taxable person shall pay an amount equal to the ITC taken on the said capital goods reduced by the percentage points as may be specified in this behalf or the tax on the transaction value (TV) of such capital goods as determined under section 15(1) of the MGL, whichever is higher.