In case of transfer or takeovers of Business, where stocks & capital goods are transferred, there may be need to transfer unutilised eligible input tax credit on said stocks & capital goods from transferor to transferee. The provision of such transfer is made in the GST regime, through Section 18(3), which outlines the situations in which credit can be transferred. Section 18(3) of the CGST Act, 2017:
Where there is a change in constitution of registered person on account of
 sale,
 merger,
 demerger,
 amalgamation,
 lease or transfer or change in the ownership of business
with the specific provisions for transfer of liabilities, the said registered person is allowed to transfer the input tax
credit remaining unutilized in the electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in the manner provided in Rule 41.
* A clarification in respect of transfer in case of death of sole proprietor is issued by CBIC, according to which in case of death of sole proprietor if business is transferred to successor than it is treated as transfer under section 18(3) and can claim such unutilised ITC of deceased subject to transfer of all liabilities to the successor.
Rule 41 of the CGST Rules, 2017:
There are certain procedure & conditions prescribed in the rule, which must be fulfilled to transfer such unutilised credit:
I. A registered person shall, in the event of sale, merger, demerger, amalgamation, lease or transfer or change in the ownership of business for any reason, furnish the details of such unutilised credit transfer on the Common Portal in FORM GST ITC-02. In case of demerger, credit to be transferred must be apportioned to the value of assets transferred in the arrangement to each such unit.
II. The transferor shall also have to submit a certificate from a practicing Chartered Accountant or Cost Accountant, to certify that the arrangement of change in constitution contains a specific provision for the transfer of liabilities.
III. Details furnished in Form GST ITC-02 by the transferor would have to be accepted by the transferee on the Common Portal.
IV. The stocks & capital goods received by the Transferee should be duly accounted in books of accounts by transferee.