Since the rollout of GST, one of the key promises has been the removal of cascading taxes and the creation of a seamless national market. The recent judgment by the Goa Bench of the Bombay High Court in Umicore Autocat India Pvt Ltd vs Union of India (2025) marks a significant step toward fulfilling that promise in the context of mergers and amalgamations.
- Case Background
The petitioner challenged the disallowance of unutilized Input Tax Credit (ITC) transfer from a company registered in Goa (transferor) to another in Maharashtra (transferee) post-merger, approved by the National Company Law Tribunal. The GST portal rejected the transfer citing that both companies must be registered in the same state. - Statutory Provisions & Arguments
The petitioner relied on Section 18(3) of the CGST Act and Rule 41 of the CGST Rules, which permit ITC transfer upon merger without state-based restrictions. The department argued that GST registrations are state-specific, ITC cannot cross state borders, and portal limitations reflected legislative intent. - Court’s Interpretation
- GST is a destination-based, harmonized tax introduced via the 101st Constitutional Amendment to integrate the market across states.
- Section 18(3) and Rule 41 legally allow transfer of ITC on mergers without state-wise limitation.
- Legislative intent focuses on substance over form and removes economic barriers, discouraging credit trapping within states.
- Revenue loss concerns are unfounded as CGST and IGST (collected by the Centre) remain unaffected.
- Practical Implications
- Portal limitations do not override statutory rights; manual processing was directed by the Court.
- The judgment distinguishes itself from earlier rulings that addressed pre-GST credits or business closure scenarios.
- Validates working capital relief for merged entities, facilitating investment and consolidation without artificial tax hurdles.
- Broader Impact & Takeaway
- Affirms GST’s promise of “One Nation, One Tax” by enabling seamless ITC flow across states post-merger.
- Encourages businesses to reassess restructuring plans and challenge procedural denials grounded solely on portal or administrative issues.
- Signals future interpretational challenges in GST regarding partial demergers and common credit allocation.
- Urges companies to devise ITC strategies aligned with the GST framework rather than outdated state-wise siloes.
This ruling is a landmark on multiple fronts, emphasizing the economic and legal cohesion envisioned by GST, and reinforcing that compliance and tax planning must focus on the spirit of the law rather than its procedural form.
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(The author is a practicing advocate, Co-Founder and Legal Head of RB LawCorp.
He specializes in GST law. Suggestions or queries can be directed to
ashsharma@rblawcorp.in. The views expressed in this article are strictly
personal.)
