ITC-02 Under GST: Transfer of Input Tax Credit

What is ITC-02 and Who Should File it?

ITC-02 is a declaration filed on the GST portal that allows a registered taxpayer (the transferor) to move unutilised ITC from its electronic credit ledger to another GST registration (the transferee) when the business — or part of it — is transferred by way of sale, merger, demerger, amalgamation, or similar arrangement. The transferor prepares and files ITC-02; the transferee then accepts or rejects the transfer online.

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What is the Need to File ITC-02?

When business ownership or legal structure changes, unutilised ITC sitting in the transferor’s credit ledger would otherwise be stranded. Filing ITC-02 ensures:

• The ITC flows legally to the new entity that continues the business,
• The transferee gets access to credit that reduces future tax outflow, and
• Tax authorities have a documented, certified trail of ITC movement.

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What are the Prerequisites of Filing ITC-02?

To file FORM GST ITC-02, the following conditions must be fulfilled:

• When a registered business undergoes a sale, merger, demerger, amalgamation, lease, or transfer, the transferor must file Form GST ITC-02 to declare the transfer of ITC.
• The transferor must have matched ITC available in its Electronic Credit Ledger as on the effective date of the merger, acquisition, demerger, lease, or transfer.
• Both the transferor and transferee must be registered under GST.
• The transferor must have filed all GST returns for previous periods without any pending compliance.
• All items marked as “Pending for action” must be cleared — the transferor must accept, reject, or modify such transactions and pay any liabilities arising from past returns.
• The business transfer must specifically provide for the transfer of liabilities, and the transferor must upload a Chartered Accountant or Cost Accountant certificate confirming this. These liabilities also include any stayed demands, litigation-related dues, or recovery-related cases.

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Format and Contents of ITC-02

Given below is the format of ITC-02 Form -

Form ITC-02 on the GST portal has the following details:

• Basic details: GSTIN, trade and legal names of transferor and transferee; ARN of transfer order, where applicable.
• ITC transfer details: Opening ITC balance and the amount proposed to be transferred under major heads (CGST, SGST, IGST, Cess). The portal auto-populates available unutilised credit from the transferor’s electronic credit ledger.
• CA/Cost Accountant details: Name, membership number, date, and certificate attachment that certifies the ITC transfer and provision for liabilities.

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How to File ITC-02 on the GST Portal?

The ITC transfer involves two steps:

• The transferor files Form GST ITC-02 declaring the unutilised ITC to be transferred.
• The transferee accepts or rejects the transfer on the GST portal.

Below are the steps the transferor must follow to file ITC-02:

Step 1: Log In

Log in to the GST Portal using your credentials.

Step 2: Open ITC-02

Go to Services > Returns > ITC Forms and select ITC-02.

Click “Prepare Online.”

Step 3: Enter Transferee Details

Enter the GSTIN of the transferee and specify the amount of ITC to be transferred under each head.

The system will auto-populate the unutilised ITC available in your Electronic Credit Ledger. You can transfer the full amount or a partial amount as required.

Step 4: Provide CA/Cost Accountant Details

Enter the following details of the certifying professional:

• Name of the firm
• Name of the CA/Cost Accountant
• Membership number
• Date of certificate

Upload the certificate and click “Save.”
A confirmation message will appear once the details are saved.

Step 5: File the Form

Check the declaration box, choose the authorised signatory, and file using DSC or EVC.
Click “Proceed” when the warning message appears, enter the OTP, and click “Verify.”
A final confirmation message will be displayed.

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What to Do After Filing Form ITC-02?

After filing:

• The transferee should reconcile the received ITC with its books and confirm acceptance on the portal.
• Both parties should ensure all past returns are filed and liabilities are disclosed or provided for (this is a prerequisite for transfer).
• Maintain CA/Cost Accountant certification and transfer documentation for audit and future scrutiny.

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