Section 87 of CGST Act, 2017 : Section 87: Liability In Case Of Amalgamation Or Merger Of Companies

Explanation using Example

Imagine Company A and Company B decide to merge into a new entity, Company AB. The merger is approved by a court order dated June 30, 2023, but it's effective retrospectively from January 1, 2023. Between January 1, 2023, and June 30, 2023, Company A sold goods to Company B worth $100,000.

According to Section 87(1) of The Central Goods and Services Tax Act, 2017, the supply of goods between Company A and Company B during this interim period will be treated as a supply between distinct entities and will be subject to GST. The sales made by Company A to Company B will be included in their respective turnovers, and both companies will be responsible for paying the applicable GST on these transactions up until the merger is officially recognized on June 30, 2023.

As per Section 87(2), for GST purposes, Company A and Company B are considered separate entities until the merger takes effect on June 30, 2023. After this date, the GST registrations for Company A and Company B would be cancelled, as they are now part of Company AB, which will have its own GST registration from that date forward.