Hi,
There was a change in status of firm from Partnership to proprietorship over 2-3 years ago, we were advised to take a new registration for the firm by the department (APVAT) when we went notify them about it. We did nto do it at that time. We have been filing regular returns after that and the business is as usual but we want to complete that process now. Will there be a penalty if we do it now. Any advise on how to go about it would be very useful.
Thanks a lot
Amit
In VAT there is no provision to change the status of firm from Partnership to Proprietorship or vice versa. For this you have to cancel the registration of the existing firm and take a new registration itself. And you can prepare a dissolution deed on a stamp paper of Rs. 500/- and immediate effect and do the necessary formalities.
I think there is no penalty since you are filing the regular returns to the concerned department.
You can get more clarfications in the following link.
https://rkconsultants.net/salestax.php
Search for:
1) WHEN MUST I CANCEL MY REGISTRATION?
2) WHAT HAPPENS IF I AM CHANGING THE LEGAL STATUS OF MY BUSINESS?
...and the whole article is too good.!! you can refer it for more details.
Thanks.!!!
Dear Anil,
Thank you for the reply. So do we apply for new registration before cancelling or after cancelling ?
What happens to the transactions during transition ?
Hi,
You need to apply for new registration ONLY AFTER CANCELLING the current firm's registration (since VAT Act does not permit to carry on 2 business at the same premises). For that you need to surrender ALL ORIGINAL VAT CERTIFICATE/S.
The VAT inspector will come and give a inspection report for the closure of business. But, as soon as you give letter to the concerned department you can proceed with the registration of the new firm with the proprietor status.
Its not clear what transaction you are referring to.
Assuming that you are referring to:
1) Stock : it will be taken over by new firm but for that you have to raise a sales bill thereby nullifying the stock.
2) Debtors/Creditors Balances : It will also be taken over by the new firm.
3) Bank : The Bank account will be closed(Partnership) and a new account will be opened with the proprietorship status.
4)Capital Accounts : it will be settled to the respective partners as per the balances showing in capital accounts.
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