Question: A Proprietorship Concern is registered under GST. It is engaged in Mfg. of Yarn from two separate premises. Since the GST Law did not allow separate registration to a person unless separate business verticals existed. Both the premises were having common GSTIN. However, the law was amended to allow the same. So, the Proprietor obtained another registration on 15/03/2019 and wef 01/04/2019 there was separate GSTIN for 2nd Premises. During FY 17-18 and FY 18-19 the concern had purchased various fixed assets in the 2nd Premises, but its credit could not be transferred since ITC 02A was not available. Since the same was not available, the concern made Invoices for Stock Transfer only. Kindly guide as to whether the machinery stands transferred as on 01/04/2019 and will it be considered as a supply.
Answer: Prior to introduction of rule 41A of the CGST rules 2017, and corresponding amendment in respect of separate registration for business vertical in section 25 of the CGST Act, 2017, any person who wished to obtain such separate registration in the same business vertical was not permitted to do so. However, once the option has been provided in the Act, the rules also stood amended, which allowed the transfer of credit on obtaining separate registration for multiple places of business within a State. As per the rule, the registered person could have filed ITC 02A for transfer of unutilised input tax credit lying in his electronic credit ledger to any or all of the newly registered places of business. The input tax credit which can be transferred under rule 41A has been restricted by the proviso to rule 41A which provides that the input tax credit shall be transferred to the newly registered entities in the ratio of the value of assets held by them at the time of registration. Accordingly, the mechanism as provided in rule 41A as introduced with effect from 1st February 2019 the option was not available for the erstwhile period. In present case, the person has obtained the registration after such amendment and thus, it would have been correct if such person had used the facility of ITC 02A. As the facility was not available on the portal, if the person has raised the invoice and paid the tax in the supplying location and taken the credit of such particular tax in the receiving location and also complied with the restriction as given under rule 41A, in such cases, the methodology should not go to the detriment of the assessee as the ultimate objective was to transfer the input tax credit as attributable to the assets lying in the units for which a separate registration has been obtained. Accordingly, in my view, the input tax credit shall not be disallowed in the hands of the assessee under the new registration.
