GST procedure on conversion of Partnership Firm to Pvt Ltd

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Discussion on GST implications when converting a Partnership Firm into a Pvt Ltd Company, covering transfer of electronic cash ledger balances, treatment of advances received by the firm, invoicing by the new entity, refund procedures, and avoiding double taxation.

THOMAS JOHN

THOMAS JOHN

(Querist)
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25 February 2026 Kindly advise on the procedures to be followed for

(1) transferring the electronic ledger balances to the new entity
(2) Advance for service was received in the old entity ( Firm) and actual invoice is received by new entity ( P Ltd Co) . How to deal this situation ?

Pls help

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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25 February 2026 1. There is no direct form (like ITC-02) to transfer a cash balance from one PAN to another.
Refund Route: The Partnership Firm must file for a refund of the excess cash balance using Form RFD-01 (Reason: Refund of excess balance in Electronic Cash Ledger).
Fresh Deposit: The Private Limited Company will need to deposit fresh cash into its own ledger for any immediate tax liabilities.
PMT-09 Limitation: While Form PMT-09 allows transfers between heads (e.g., CGST to IGST), it does not allow transfers between different PANs/Legal Entities.

2. The Recommended Procedure:
Option A (Transfer of Liability): If the contract is legally transferred to the Company, the Company should issue the final Tax Invoice. In the invoice, the Company should reference the advance already taxed by the Firm. To avoid "double tax," the Firm should effectively "transfer" the advance liability.
Option B (Clean Cut - Recommended): * The Firm should issue a Tax Invoice to the customer for the portion of the service covered by the advance (before its GST registration is cancelled).

The Company then issues a new invoice for the remaining balance of the service.
If the service hasn't started and the Firm cannot issue a Tax Invoice, the Firm should issue a Refund Voucher to the customer, claim a GST refund, and then have the customer pay the advance fresh to the Company.
Note: Since the Firm and Company are "distinct persons" under GST (different PANs), an invoice issued by the Company cannot technically "adjust" an advance recorded on the Firm's GSTIN.

THOMAS JOHN

THOMAS JOHN

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26 February 2026 Thank you. Your advice is much appreciated

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