What does this Section say?

Section 87 deals with GST implications when two or more companies are amalgamated or merged pursuant to an order of a court, tribunal, or competent authority. Often, the merger order takes effect from a retrospective date, although the order itself may be issued later.

The section clarifies that transactions between the merging companies during the period from the effective date of amalgamation to the date of the actual order shall be treated as taxable supplies if they would otherwise qualify as supplies under GST.

This provision prevents companies from claiming that transactions between them should be ignored merely because the merger is later approved with retrospective effect. For GST purposes, such transactions remain valid and taxable until the date the merger order is actually passed.

Each company is required to file GST returns and discharge tax liabilities separately for the period before the merger order becomes effective in law. After the merger is finalized, GST registrations may be amended or surrendered as applicable.

The provision ensures clarity regarding tax treatment of transactions occurring during the intervening period and prevents revenue loss due to retrospective merger arrangements.

The objective is to maintain certainty in tax administration and ensure that GST obligations arising before the merger order are properly discharged.

Example

Company A and Company B merge with effect from 1 April, but the tribunal order is issued on 1 September. Supplies between the companies during April to August remain taxable under GST.

Key Points

• Applies to amalgamation and merger.
• Retrospective merger does not nullify earlier transactions.
• Inter-company supplies remain taxable.
• Separate GST compliance continues until merger order.

In One Line

Transactions between merging companies remain taxable until the merger order is actually issued.