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Regarding transfer of stock

dktoocool (manager) (21 Points)

05 February 2025

i need help i have 3 indivisual firms with diffrent propritors. we are merging all firms to a parnership firm. we have stock of goods i old firms how can we transfer stock to new firm without paying gst.

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Rama chary Rachakonda (Master in Accounts & high court Advocate) (8545 Points)
Replied 05 February 2025

Merging three individual firms into a partnership firm can be a complex process, especially when it comes to transferring stock without paying GST.

Here's a step-by-step guide to help you achieve this: Conditions for Tax-Free Transfer To transfer stock without paying GST, you must meet the following conditions:

1. *Same PAN*: All three individual firms and the new partnership firm must have the same Permanent Account Number (PAN).

2. *Same Business*: The business activity of the individual firms and the new partnership firm must be the same.

3. *No Change in Ownership*: The ownership of the goods must not change; only the firm's structure is changing.

Transfer of Stock To transfer the stock, follow these steps:

1. *Conduct a Stock Audit*: Perform a physical stock audit to determine the quantity and value of the goods to be transferred.

2. *Pass a Board Resolution*: Pass a board resolution in each individual firm, authorizing the transfer of stock to the new partnership firm.

3. *Issue a Stock Transfer Note*: Issue a stock transfer note, which should include the following details: - Descriptttion of the goods - Quantity and value of the goods - Date of transfer - Name and address of the transferee firm (new partnership firm)

4. *Update Accounts and Records*: Update the accounts and records of all firms to reflect the transfer of stock.

GST Implications Since the transfer of stock is between firms with the same PAN and business activity, it is considered a *transfer of goods without consideration*.

As per GST laws, such transfers are not subject to GST. However, you must:

1. *Maintain Proper Records*: Maintain proper records of the stock transfer, including the stock transfer note, board resolutions, and updated accounts.

2. *Report the Transfer in GSTR-3B*: Report the transfer of stock in the GSTR-3B return of the new partnership firm. Conclusion

By following these steps and meeting the conditions, you can transfer the stock from the individual firms to the new partnership firm without paying GST. Ensure you maintain proper records and report the transfer in the GSTR-3B return.