GST ITC – 02A Return Filing, Format, Eligibility & Rule

What is FORM ITC-02

ITC-02A is a declaration for the transfer of unutilized ITC from the existing organization of a registered taxpayer to a newly registered entity (different place of business) in the same state or in a union territory.
As per section 25(2) of the CGST Act, if in case a person has multiple places of business in a State /UT, he may take separate registration for each place of business.

How does it work?

When a business person starts a new operation in the same state/UT and transfers a few of your assets to the newly registered business. When the assets are transferred, the ITC for this transaction will be held in the existing business. Henceforth unutilized ITC is preset in the existing entity from the newly registered entity.

Enablement of ITC-02

Earlier ITC-02A form was not enabled, the transferor used to book sales entry to the transferee. This unnecessarily increased the turnover of the transferor without actual sales being made.
Later in May 2020, the functionality of GST ITC-02 was enabled.

Rule 41A for Form ITC-02A

The rule 41A tells how a taxpayer can transfer credit funds lying in the Electronic Cash Ledger of his existing business to a newly registered business. It is quoted for different/multiple places of business in the same state or union territories.

1. If a registered taxpayer on obtaining a separate registration for multiple places of business wants to transfer the credit either partly or fully to the newly registered entity, then the taxpayer has to furnish it within 30 days of obtaining the separate registration only if the ITC that needs to be transferred is in the ratio of the value of assets held by the business at the time of the registration.

2. The transferee has to accept the details submitted by the transferor in order to avail of the credit in the ECL (Electronic Cash Ledger).

Purpose of using Form GST ITC-02A

The method of ITC transfer is similar to the distribution of ITC by ISD. But that difference is it for the same state/Union Territory. It is also based on asset distribution.
There comes a case, where before a branch is set up within the same state, the capital goods, inputs, or input services meant for that new branch are purchased by the head office. In that case, the principal place of business would have already claimed ITC on such capital goods, inputs, or input services.
Such ITC claims belong to the branch since it ultimately consumes or uses the capital goods, input services, or inputs.
Thus, the Form GST ITC-02A is used to transfer such unutilized ITC to the newly established branch.

Form GST ITC-02A