Authors: Rajaalan A, Kannirasu S
Abstract: For some time now, the guiding policy across company law and income tax has been one of neutrality: when a company reorganises to hived off a division, merge with a subsidiary, or move assets within a group, the reorganisation itself is not meant to be a taxable event. Goods and Services Tax (GST) has not fully absorbed this principle. It addresses restructuring through a scatter of independent provisions, an exemption for transfer of a business as a going concern, a credit apportionment mechanism under Rules 41 and 41A of the CGST Rules, and the procedural requirement of filing FORM GST ITC-02, which were not designed to operate together and do not always do so in practice. This paper examines three points at which that gap becomes visible. The first is the going-concern exemption itself, which the Authorities for Advance Ruling and courts test against inconsistent standards of proof. The second is the mismatch between the “appointed date” fixed by a Tribunal-sanctioned scheme under company law and the transaction-based method by which GST fixes the timing of registration and supply. The third is the absence of a clear mechanism for dividing a common, non-vertical-specific credit ledger among the entities that emerge from a restructuring. For companies undergoing restructuring, these gaps can translate into real compliance exposure and financial risk. The timing of this review matters. The paper closes with a coherent, implementable framework designed to bring consistency to how these disputes are resolved, reduce litigation, and strengthen the credibility of the GST regime for all stakeholders.
