Rules 41 and 41A explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 41 lets a registered person transfer unutilised input tax credit to the transferee when a business is sold, merged, demerged, amalgamated, leased or transferred, using FORM GST ITC-02. Rule 41A does the same where a registered person takes separate registration for multiple places of business in a State or Union territory under rule 11, using FORM GST ITC-02A within thirty days.
This article follows the Central Goods and Services Tax Rules, 2017 as amended up to 31 October 2025 in the compilation consulted; notifications issued after that date should be checked.
On a sale, merger, de-merger, amalgamation, lease or transfer of business, the transferor furnishes the details in FORM GST ITC-02 with a request to transfer unutilised input tax credit lying in the electronic credit ledger, along with a certificate of a practising chartered accountant or cost accountant that the transfer of liabilities has been specifically provided for. The transferee accepts the details and the credit is credited to his electronic credit ledger. Under rule 41A, a person with separate registrations furnishes FORM GST ITC-02A within thirty days of obtaining them.
The section behind the rules
Rule 41 is made under section 18(3) of the CGST Act, 2017, which allows a registered person to transfer unutilised credit on a change in constitution with the specific provisions for transfer of liabilities. See section 18(3): transferring ITC on merger, demerger or sale and section 18 of the CGST Act. Rule 41A depends on rule 11, which allows separate registration for multiple places of business in a State or Union territory: see rule 11: separate registration for multiple places in one State. For help in planning a restructuring so that credit moves with the business, see our input tax credit reconciliation service.
Rule 41(1): the request and the details
"A registered person shall, in the event of sale, merger, de-merger, amalgamation, lease or transfer or change in the ownership of business for any reason, furnish the details of sale, merger, de-merger, amalgamation, lease or transfer of business, in FORM GST ITC-02, electronically on the common portal along with a request for transfer of unutilized input tax credit lying in his electronic credit ledger to the transferee."
Three points. The trigger is wide: sale, merger, de-merger, amalgamation, lease or transfer, or change in the ownership of business, "for any reason". What moves is unutilised credit lying in the electronic credit ledger. And the vehicle is FORM GST ITC-02, with a request to the transferee. The sub-rule prints no time limit.
Proviso (demerger). "In the case of demerger, the input tax credit shall be apportioned in the ratio of the value of assets of the new units as specified in the demerger scheme."
Explanation. "The 'value of assets' means the value of the entire assets of the business, whether or not input tax credit has been availed thereon." The footnote records that the Explanation was inserted by Notification No. 16/2019 - CT dated 29.03.2019.
Rule 41(2): the certificate
"The transferor shall also submit a copy of a certificate issued by a practicing chartered accountant or cost accountant certifying that the sale, merger, de-merger, amalgamation, lease or transfer of business has been done with a specific provision for the transfer of liabilities."
Rule 41(3): acceptance by the transferee
"The transferee shall, on the common portal, accept the details so furnished by the transferor and, upon such acceptance, the un-utilized credit specified in FORM GST ITC-02 shall be credited to his electronic credit ledger."
The credit reaches the transferee's ledger only on his acceptance. If he does not accept, the sub-rule gives no credit.
Rule 41(4): books of account
"The inputs and capital goods so transferred shall be duly accounted for by the transferee in his books of account."
Rule 41A: separate registration within a State or Union territory
Sub-rule (1). "A registered person who has obtained separate registration for multiple places of business in accordance with the provisions of rule 11 and who intends to transfer, either wholly or partly, the unutilised input tax credit lying in his electronic credit ledger to any or all of the newly registered place of business, shall furnish within a period of thirty days from obtaining such separate registrations, the details in FORM GST ITC-02A electronically on the common portal, either directly or through a Facilitation Centre notified in this behalf by the Commissioner."
Proviso. "The input tax credit shall be transferred to the newly registered entities in the ratio of the value of assets held by them at the time of registration."
Explanation. As in rule 41: "value of assets" means the value of the entire assets of the business whether or not input tax credit has been availed thereon.
Sub-rule (2). "The newly registered person (transferee) shall, on the common portal, accept the details so furnished by the registered person (transferor) and, upon such acceptance, the unutilised input tax credit specified in FORM GST ITC-02A shall be credited to his electronic credit ledger."
Rule 41 and rule 41A compared
| Feature | Rule 41 | Rule 41A |
|---|---|---|
| Trigger | Sale, merger, de-merger, amalgamation, lease, transfer or change in ownership | Separate registration for multiple places of business under rule 11 |
| Form | FORM GST ITC-02 | FORM GST ITC-02A |
| Time limit | None printed | Within thirty days from obtaining the separate registrations |
| Certificate | Practising chartered accountant or cost accountant, for the transfer of liabilities | None printed |
| Apportionment | Demerger: ratio of value of assets of the new units as in the demerger scheme | Ratio of the value of assets held by the newly registered entities at the time of registration |
| Acceptance | By the transferee | By the newly registered person |
Who does what, by when
| Who | What | Form | When | Rule |
|---|---|---|---|---|
| Transferor | Furnishes details with a request to transfer unutilised credit | FORM GST ITC-02 | On the event; no time printed | 41(1) |
| Transferor | Submits copy of the certificate of a practising chartered accountant or cost accountant | With the form | With the request | 41(2) |
| Transferee | Accepts the details; credit is credited to his electronic credit ledger | On the common portal | On acceptance | 41(3) |
| Transferee | Accounts for inputs and capital goods in his books | Books of account | After transfer | 41(4) |
| Person with separate registrations | Furnishes details to transfer unutilised credit to the new places of business | FORM GST ITC-02A | Within thirty days from obtaining the registrations | 41A(1) |
| Newly registered person | Accepts the details; credit is credited | On the common portal | On acceptance | 41A(2) |
A worked example
Omega Textiles LLP, an invented firm, is demerged into two units under a scheme of demerger that specifically provides for the transfer of liabilities. The scheme states the value of assets of each new unit. The unutilised credit in Omega's electronic credit ledger is apportioned in the ratio of the value of assets of the two units as specified in the scheme (the proviso to rule 41(1)), where "value of assets" is the value of the entire assets whether or not credit was availed on them.
Omega furnishes the details in FORM GST ITC-02 with a request for the transfer, together with a certificate of a practising chartered accountant or cost accountant that the demerger provides for the transfer of liabilities. Each new unit, as transferee, accepts the details on the common portal; the credit is credited to that unit's electronic credit ledger. The units then account for the inputs and capital goods in their books.
Contrast Pinewood Retail, an invented business with a single registration in a State, which takes separate registrations for two more places of business under rule 11. If it wants to move part of its unutilised credit to the new places, it must furnish FORM GST ITC-02A within thirty days from obtaining the registrations; the credit goes in the ratio of the value of assets held by the newly registered entities at the time of registration.
Points to watch
- The certificate. Rule 41(2) is about transfer of liabilities, not credit. Without a specific provision for transfer of liabilities, the certificate cannot be given.
- Acceptance is essential. Nothing is credited to the transferee until he accepts.
- Rule 41A has a thirty-day clock. Rule 41 does not print one.
- Unutilised credit only. Both rules move credit lying unutilised in the electronic credit ledger.
- Value of assets means the whole business assets, not only those on which credit was taken.
Need help moving credit in a restructuring?
A restructuring that leaves credit stranded, or an ITC-02 that the transferee never accepts, costs real money. We coordinate the transferor and transferee filings, the apportionment and the certificate, and keep a record that matches the ledgers. See our input tax credit reconciliation service.
Key takeaways
- Rule 41(1): FORM GST ITC-02 with a request to transfer unutilised credit in the electronic credit ledger to the transferee.
- Demerger: credit apportioned in the ratio of the value of assets of the new units as specified in the scheme.
- Rule 41(2): certificate of a practising chartered accountant or cost accountant on the specific provision for transfer of liabilities.
- Rule 41(3): the transferee accepts, and the credit reaches his electronic credit ledger.
- Rule 41A: FORM GST ITC-02A within thirty days from obtaining separate registrations; credit in the ratio of the value of assets.
Read next
- Rule 40 of the CGST Rules, 2017: manner of claiming credit in special circumstances
- Rules 44 and 44A of the CGST Rules, 2017: reversal of credit
- Section 18(3): transferring ITC on merger, demerger or sale
- Rule 11: separate registration for multiple places in one State
Disclaimer: Based on the Central Goods and Services Tax Rules, 2017 and the GST Acts as amended up to 31 October 2025 in the compilation consulted, read with the Finance Act, 2026 where this article says so, as consulted on 2 October 2026. Notifications, circulars and amendments issued after that date, the forms on the common portal and the way the tax authorities apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.