Conversion of partnership from into private limited

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Radhesh joshi

40 Points Joined December 2011

One of the partnership firm wants to convert the firm into a private limited company. However, both existing partners will become directors in the private limited company, maintaining the same share ratio and ownership as in the partnership. No new directors will be appointed, and no existing partners will exit. In this context, what is the applicability of GST on the stock transfer? Will there be any liability for the partnership firm to pay GST? Additionally, could you please explain the income tax implications of this transition

Replies (3)

Rama chary Rachakonda

Master in Accounts & high court Advocate

8727 Points Joined December 2011

GST Applicability: - Stock transfer from partnership firm to private limited company is considered a supply of goods under GST. -

However, since both entities have the same ownership and management, it can be considered a "reorganization" under GST. -

As per GST rules, reorganization is exempt from GST if certain conditions are met. -

To claim exemption, the partnership firm and private limited company must obtain a GST registration and file Form GST DRC-03 within 30 days of the transfer. Income Tax Implications: -

The partnership firm's income will be taxed as per the Income-tax Act, 1961. - The private limited company will be taxed separately from the partnership firm. - Capital gains tax may apply if the partnership firm's assets are transferred to the private limited company at a value different from their book value. - The partners may be subject to income tax on their individual share of the partnership firm's profits. -

Stamp duty may apply on the transfer of assets from the partnership firm to the private limited company.

CS Advocate Abhishek Goyal

M Com FCS LLB M-AIMA

14026 Points Joined June 2009

No GSt on stock transfer if business in transferred on a going concern basis from partnership to private limited company providing for transfer of all assets and liabilities.