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  • In case of Death of Proprietor, if the business is continued by any person then it'll be considered as Transfer of Business under GST (Section 18 (3) - CGST Act).
  • There can be 2 Scenarios in case of Death. 
  • I'll try to cover both scenarios along with the procedure in each scenario.
  • Following is the Chart for the topics we'll cover in this blog.

Death of Proprietor

Scenario 1: Business is Continued by the Legal Heir.

Step 1: Obtaining the New Registration by Legal Heir.

Obtaining the New Registration by Legal Heir

  • Legal Heir or Successor will be liable to be registered w.e.f. the date of such transfer i.e. death in our case. (Section 22 (3) - CGST Act)
  • File application for registration in Form GST REG - 01.
  • Select reason to obtain registration as "Death of Proprietor".
  • The date on which liability of Registration arise => Date of Death of Proprietor. 
  • Death certificate of deceased proprietor also need to be upload while filing REG - 01.
GST Compliance after Death of Proprietor

Step 2:  Transfer of Unutilized Input Tax Credit (ITC).

Transfer of Unutilized ITC

  • The unutilized ITC   lying in Electronic Credit Ledger of deceased   can be transferred to successor.
  • The procedure to transfer unutilized ITC has been stated in   Rule-41 (CGST Rules).
  • Procedure for Authorized Representative of Transferor (Deceased): -
    • Form GST ITC - 02 to be furnished providing details of Transfer along with request for transfer of unutilized ITC.
    • A copy of Certificate issued by practicing CA or CMA certifying transfer has been done according to the provision for transfer of liabilities shall also be submitted.
  • Procedure for Transferee (Successor): -
    • Accept the details so furnished by Transferor on common portal.
    • After acceptance, the unutilized ITC stated in ITC-02 will be credited to Electronic Credit Ledger immediately.
    • Inputs and Capital Goods should be duly accounted in the books of accounts.
  • Imp. Point to be Noted: -
    • ITC-02 to be filed only if there is any ITC.
    • No time limit for filing ITC - 02.
 

Step 3: Cancellation of Registration.

Cancellation of Registration

  • Application for cancellation to be made in Form GST REG 16.
  • Following details to be provided in Form:
    • Details of inputs, semi-finished, finished goods held in stock on date of cancellation or registration is applied.
    • Liability (i.e. ITC on Stock / Capital Goods held) thereon.
    • Details of the payment.
  • Form GST REG 16 to be filed within 30 Days from Death.
  • The proper officer has to issue order for cancellation in Form GST REG 19 within 30 days of application.
  • Imp. Point to be Noted: -
    • As business is continued by legal heirs then the stock will be transferred to legal heir as shown in Step 2.
    • Thus, there will no stock on date of application of cancellation and no ITC thereon.
    • Thus, no need of payment of tax.
 

Step 4: - Transfer of Liability.

  • Section 93(1) - CGST Act states:
    • When a person dies then,
    • The person who continues the business
    • Shall be liable to pay tax, interest or any penalty
    • Due from transferor (i.e. Deceased person)

Scenario 2 : Business is Closed by the Legal Heir.

Step 1: Cancellation of Registration.

  • The procedure is same as given in Step 3 above.
  • In this scenario there is no transfer of business. 
  • Thus, there will also be no transfer of stock.
  • This will result in arising of tax liability of amount equal to ITC on stock held.

Step 2: Payment of ITC contained in Stock / Capital Goods.

  • The ITC taken on stock / Capital Goods held at the time of application of cancellation to be paid.
  • The requirement to debit Electronic Credit Ledger / Cash Ledger is not prerequisite for applying Cancellation.
  • It can be done at time of submission of Final Return (Form GSTR - 10). 

Step 3: Filing of Final Return (Form GSTR - 10).

Filing of Final Return Form GSTR-10

  • Final return must be filed within 3 months from date of cancellation order.
  • Incase final return not filed within due date, then Notice in Form GSTR-3A to be issued to taxpayer.
  • If taxpayer still fails to file final return within 15 days of receipt of GSTR-3A, then an Assessment Order in GST ASMT-13 will be issued.

Step 4: Transfer of Liability.

  • Section 93(1) - CGST Act states:
    • When a person dies and business is Discontinued then,
    • Legal representative shall be liable to pay
    • Tax, interest or any penalty
    • Due from transferor (i.e. Deceased person)
    • Out of the Estate of the deceased person.

DISCLAIMER: -

  • The above details are gathered from GST Act and also with help  various articles and blogs.
  • I have tried my best to compile all the required data in a simple and bullet wise format.

The author can also be reached at  capratikp@gmail.com


 

Published by

CA Pratik Patel
(Mr.)
Category GST   Report

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