GST Registration Transfer on Business Transfer, Merger & Succession — REG-29, REG-30 & REG-31

Section 18(3) of the CGST Act, 2017: ITC transfer on change of constitution (sale, merger, demerger, amalgamation, lease, transfer) where liabilities are also transferred; Form GST ITC-02 filed by transferor; transferee accepts electronically. Section 29 of the CGST Act, 2017: cancellation of GST registration; Section 29(5): ITC reversal on closing stock on effective date of cancellation — higher of ITC attributable to stock or tax on market value. Form GST REG-29: application for cancellation of registration by registered person. CBIC Circular No. 38/12/2018-GST: clarification on treatment of business transfers as supply — going concern transfer exempt; asset-only transfer taxable. Notification No. 12/2017-Central Tax (Rate), Entry 2: services by way of transfer of a going concern, as a whole or an independent part thereof, exempt from GST. Rule 41 of the CGST Rules, 2017: procedure for transfer of ITC on business reorganisation.

When a business undergoes a change in ownership — through sale, merger, demerger, amalgamation, conversion, or succession (death of proprietor) — the existing GST registration of the transferor entity cannot simply be transferred to the new entity. The GST Act requires specific procedures to cancel the transferor's registration and to migrate Input Tax Credit (ITC) from the transferor to the transferee.

Section 18(3) of the CGST Act, 2017 is the primary provision governing ITC transfer on business reorganisation. It provides that where there is a change in the constitution of a registered person on account of sale, merger, demerger, amalgamation, lease, or transfer of a business — with a specific provision for transfer of liabilities — the said registered person shall be allowed to transfer the unutilised ITC remaining in its electronic credit ledger to the transferee. The ITC transfer is effected by filing Form GST ITC-02 by the transferor on the GST portal, which requires the transferee to accept the transfer electronically.

The cancellation of GST registration of the transferor entity (in cases of merger, amalgamation, or sale of the entire business) is applied for in Form GST REG-29 (application for cancellation by the registered person) or Form GST REG-30 (by a tax officer on a show cause). The effective date of cancellation must be chosen carefully — all returns (GSTR-1, GSTR-3B) must be filed up to and including the last tax period before cancellation, and any liability on closing stock must be discharged under Section 29(5) of the CGST Act, 2017 (ITC reversal on stock held on the effective date of cancellation, which is higher of ITC attributable to stock or tax on stock's market value).

Where the business transfer involves a going concern supply (sale of a business as a going concern — assets + liabilities transferred together), CBIC Circular No. 38/12/2018 clarifies that such a supply is exempt from GST under Notification No. 12/2017-CT(Rate), Entry 2 (services by way of transfer of a going concern, as a whole or an independent part thereof). This exemption and the condition for its applicability (all assets and liabilities transferred together) must be documented carefully. Post-transfer, the transferee entity must obtain a fresh GST registration in the states where the transferred business operates, if not already registered.