Alstom Transport: Why Partial ITC-02 Transfer on Amalgamation Fails — Supreme Court to Rule
A closely watched GST dispute involving Alstom Transport is back in focus, with a Special Leave Petition against the Gujarat High Court’s ruling listed before the Supreme Court. At stake is a question that affects every business restructuring through amalgamation or demerger: can a transferor split its unutilised input tax credit between a Form GST ITC-02 transfer and a separate cash refund claim?
- Gujarat HC has held that a transferor cannot split unutilised ITC between a Form ITC-02 transfer and a separate cash refund claim on amalgamation.
- Rule 41 requires the complete eligible ITC balance to move via ITC-02 — no partial transfer-plus-refund structuring.
- The ruling is under SLP before the Supreme Court; treat any live restructuring transaction conservatively until the appeal is decided.
The core issue
Under Rule 41 of the CGST Rules, 2017, when a business amalgamates, merges, or demerges, the unutilised ITC balance in the transferor’s electronic credit ledger transfers to the transferee via Form GST ITC-02, supported by a CA or CMA certificate. In the Alstom Transport matter, the transferor sought to transfer only part of its ITC balance via ITC-02 while separately claiming a cash refund of the retained portion. The Gujarat High Court held that this bifurcation is not permissible — the rule contemplates transfer of the complete eligible balance, not a split between transfer and refund.
Why the distinction matters
The ruling closes a structuring route that some restructuring transactions had used to convert credit into cash rather than carrying it forward on the transferee’s books. If upheld by the Supreme Court, it confirms that Rule 41 is a full-balance mechanism: the entire eligible ITC as on the appointed date must move to the transferee, certified against the ledger balance, with no scope for a parallel refund of a retained portion.
Practical exposure while the appeal is pending
- Any client currently mid-amalgamation or demerger with a live ITC-02 filing should reconcile the transferred amount to the full electronic credit ledger balance as on the appointed date, not a negotiated or partial figure.
- Do not structure a partial ITC-02 transfer alongside a separate refund application until the Supreme Court’s outcome is known — the position at the High Court level is against it.
- Revisit the CA/CMA certification process to ensure it certifies the complete balance being transferred, matching the ledger to the rupee.
What to watch
The Supreme Court’s ruling will settle the point nationally. Until then, the Gujarat High Court’s reasoning is the most authoritative guidance available, and restructuring transactions should be planned on the conservative assumption that it will be upheld.
Citation and case status should be independently verified before advising clients, including through the Supreme Court’s own cause list and cbic.gov.in circulars on ITC-02. See our Act Explainers section for a walkthrough of how ITC reversal and reconciliation rules interact.
Prepared by the Finoscape Editorial Team
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