Section 87 of CGST Act - Liability in Case of Amalgamation or Merger of Companies
Section 87 of the Central Goods and Services Tax Act, 2017 deals with the GST consequences where two or more companies are amalgamated or merged and the merger or amalgamation takes effect from a date earlier than the date of the relevant order. The provision determines how transactions between the merging companies are treated during this intervening period and when their separate GST registrations cease to operate.
Updated: 15 September 2026
A retrospective merger order does not retrospectively eliminate GST consequences for transactions between the merging companies. For GST purposes, the companies continue to be treated as distinct companies up to the date of the amalgamation or merger order.
Section 87 - Statutory Provision
87. Liability in case of amalgamation or merger of companies.
(1) When two or more companies are amalgamated or merged in pursuance of an order of court or of Tribunal or otherwise and the order is to take effect from a date earlier to the date of the order and any two or more of such companies have supplied or received any goods or services or both to or from each other during the period commencing on the date from which the order takes effect till the date of the order, then such transactions of supply and receipt shall be included in the turnover of supply or receipt of the respective companies and they shall be liable to pay tax accordingly.
(2) Notwithstanding anything contained in the said order, for the purposes of this Act, the said two or more companies shall be treated as distinct companies for the period up to the date of the said order and the registration certificates of the said companies shall be cancelled with effect from the date of the said order.
Meaning and Scope of Section 87
Section 87 addresses a particular problem created when an amalgamation or merger is approved with retrospective effect. A merger scheme may provide that the amalgamation is effective from an appointed date that precedes the date on which the court, Tribunal or other competent authority makes the order.
For corporate purposes, the scheme may therefore operate from the earlier appointed date. Section 87, however, specifically regulates the GST treatment of supplies made between the companies during the period between that earlier effective date and the actual date of the merger or amalgamation order.
When Does Section 87 Apply?
Section 87 becomes relevant where the following circumstances exist:
- Two or more companies are amalgamated or merged.
- The amalgamation or merger occurs pursuant to an order of a court or Tribunal, or otherwise.
- The order takes effect from a date earlier than the date on which the order itself is made.
- The companies supplied or received goods, services or both between themselves during the intervening period.
Where these conditions are satisfied, the GST treatment of those transactions is governed by Section 87.
Retrospective Merger and Inter-Company Supplies
Sub-section (1) makes it clear that transactions between the merging companies during the intervening period cannot simply be ignored because the amalgamation order subsequently operates from an earlier date.
Supplies and receipts between the companies during the period beginning with the effective date specified in the merger arrangement and ending on the date of the order are required to be included in the turnover of the respective companies. GST liability must consequently be determined and discharged in accordance with the Act.
Assume Company A and Company B are amalgamated under an order dated 1 August, while the scheme states that the amalgamation takes effect from 1 April. If Company A supplied taxable services to Company B between 1 April and 1 August, Section 87 prevents those supplies from being retrospectively disregarded merely because the merger takes effect from 1 April. The relevant transactions remain part of the respective companies' turnover for GST purposes.
Companies Remain Distinct for GST Until Date of Order
Sub-section (2) contains a non-obstante provision. It applies notwithstanding anything contained in the amalgamation or merger order.
For purposes of the CGST Act, the merging companies are treated as separate and distinct companies up to the date of the order. Their separate legal treatment under the merger arrangement does not retrospectively erase their distinct GST status during the intervening period.
This provision is important because GST is imposed on supplies. Treating the companies as distinct until the order date preserves the GST consequences of supplies made between them before that date.
Cancellation of GST Registration
Section 87(2) further provides that the registration certificates of the companies concerned are to be cancelled with effect from the date of the merger or amalgamation order.
Accordingly, the statutory distinction should be kept in mind between the earlier effective or appointed date under the merger arrangement and the date of the order for the purposes specifically governed by Section 87.
The GST Portal recognizes transfer of business on account of amalgamation, merger or demerger as a circumstance relevant to cancellation of registration. Businesses undergoing restructuring should therefore coordinate the merger documentation, GST registration position, outstanding returns and tax liabilities rather than treating the appointed date alone as determinative for GST compliance.
Transfer of Input Tax Credit on Merger or Amalgamation
Section 87 should also be read with the provisions governing transfer of unutilized input tax credit when a business is reorganized.
Under the CGST Rules, a registered person undergoing a sale, merger, demerger, amalgamation, lease or transfer of business may furnish the prescribed details in FORM GST ITC-02 on the common portal and request transfer of the unutilized input tax credit lying in the electronic credit ledger to the transferee, subject to the applicable statutory conditions.
The transfer of credit is therefore a separate compliance matter and should not be confused with the treatment of inter-company transactions under Section 87.
Section 87 at a Glance
| Issue | Position under Section 87 |
|---|---|
| Type of transaction | Amalgamation or merger of two or more companies |
| Relevant situation | Merger takes effect from a date earlier than the date of the order |
| Inter-company supplies during intervening period | Included in turnover of the respective companies |
| GST liability | Tax remains payable in accordance with the CGST Act |
| Status of merging companies | Treated as distinct companies up to the date of the order |
| Registration certificates | Cancelled with effect from the date of the order |
| Transfer of eligible unutilized ITC | Governed separately by the applicable CGST provisions and FORM GST ITC-02 procedure |
Practical GST Compliance Points
Companies involved in a merger or amalgamation should review the GST consequences of the restructuring before closing the registrations of the transferor entities. Important matters ordinarily include identifying the appointed date and order date, reconciling supplies between the merging entities during the intervening period, determining tax liability on those transactions, completing applicable GST returns, dealing with cancellation of registrations and considering transfer of eligible unutilized input tax credit.
The exact compliance requirements will depend on the structure of the transaction, the terms of the merger scheme, the GST registrations involved and the applicable provisions of the CGST Act and Rules.
Related Provisions of Chapter XVI
Section 87 forms part of Chapter XVI - Liability to Pay in Certain Cases of the CGST Act. Related provisions include liability arising from transfer of business, principal-agent transactions, liquidation, private companies, partnerships and other specified circumstances.