GST provisions in case of Death of Sole Proprietor 156/2020-21

In today’s update, we are going to discuss about the transfer of business in case of death of sole proprietor where the business is taken over by the legal heir in questionnaire form.
What is the provision in GST after death of proprietor? And if his legal heir takes over his business by will, what is the procedure under GST law?
As per Notification No. 60/2018 – Central Tax dt 30/10/2018, in case of death of sole proprietor, Legal heir has to visit office of the proper officer (Jurisdiction Officer) and submit the death certificate of the sole proprietor along with the succession certificate before the proper officer as documentary evidence. Proper officer will add legal heir as the authorized signatory on the GST Portal.
In case the successor is minor, he cannot be added as an authorized signatory. In such cases, minor successor needs to be represented by his legal/ natural / testamentary guardian. The legal guardian needs to be appointed or nominated by the competent authority. Legal guardian can take decisions on behalf of minor legal heir/ successor and he can also appoint authorized signatory for this purpose.
Legal heir has to apply for new registration. Once the new registration is approved, Legal heir has to apply for the transfer of ITC by filing FORM GST ITC–02 to new entity. However, there is no restriction on filing of ITC-02 pre or post cancellation. It is an independent firm and has no relation with cancellation of the sole proprietorship firm. Legal heir or his/ her authorized signatory has to submit the application for cancellation and select the “Death of Proprietor” as reason of cancellation of registration and attach sufficient proof along with application.
Username and Temporary password reset will be communicated to the e-mail address of the newly added authorized signatory as entered by the Tax Officer in his jurisdiction. Next, the newly added authorized signatory needs to login to the GST Portal and login using the First time login link. He/ She will be forced to change the username and password after first time login with the username and temporary password that was emailed on the newly added e-mail address of the primary authorized signatory.

How to transfer stock of the deceased firm to legal heir and the liability to pay GST thereon?
As per point 4(c) of Schedule II of CGST Act, 2017, where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless—
(i) the business is transferred as a going concern to another person; or
(ii) the business is carried on by a personal representative who is deemed to be a taxable person.
In case the business is continued by the legal heir, then all the stock shall be transferred to legal heir and no payment of tax is required ss per exception number (ii) mentioned above. However, if the business of the deceased is being closed by the legal heir, GST would be payable on the stock available on the date of closure of business.
How to transfer input tax credit to the legal heir according to Circular No. 96/15/2019-GST dated 28th March, 2019?
Sub-section (3) of section 18 of the CGST Act, allows the registered person to transfer the unutilized input tax credit lying in his electronic credit ledger to the transferee in the manner prescribed in rule 41 of the CGST Rule.
A registered person shall file FORM GST ITC-02 electronically on the common portal with a request for transfer of unutilized ITC lying in his electronic credit ledger to the transferee, in the event of sale, merger, de-merger, amalgamation, lease or transfer or change in the ownership of business for any reason.
In case of transfer of business on account of death of sole proprietor, the transferee/successor shall file FORM GST ITC-02 in respect of the registration which is required to be cancelled on account of death of the sole proprietor. FORM GST ITC-02 is required to be filed by the transferee/successor before filing the application for cancellation of such registration. Upon acceptance by the transferee / successor, the un-utilized ITC specified in FORM GST ITC-02 shall be credited to his electronic credit ledger.
Whether ITC-02 is required to be filed, in case there is no ITC available in the electronic credit ledger of the deceased firm?
If there is no ITC available in the electronic credit ledger of the deceased firm, there is no requirement for filing ITC-02.
Whether legal heir is responsible for paying GST?
Section 93 (1) provides that where a person, liable to pay tax, interest or penalty under the CGST Act, dies, then the person who continues business after his death, shall be liable to pay tax, interest or penalty due from such person under this Act. It is therefore clarified that the transferee / successor shall be liable to pay any tax, interest or any penalty due from the transferor in cases of transfer of business due to death of sole proprietor.

What is procedure for transferring business of deceased to legal heir in GST?
The GST registration of deceased needs to be cancelled by mentioning the reason as “on account of death of proprietor” and new GST registration needs to be obtained by the legal heir. However, if the legal heir is already registered, then the GSTIN of transferee is to be mentioned while surrendering the registration of deceased person so that the business of deceased is linked with the existing business of legal heir.

Can a legal heir transfer the excess balance in Electronic Cash Ledger to his own entity in case of death of sole proprietor?
No specific rule provides for transfer of balance in electronic cash ledger of deceased proprietor to his legal heir. However, any excess balance in cash ledger can be claimed as refund as per section 49(6).

This is solely for educational purpose.
You can reach us at www.capradeepjain.com, at our facebook page on https://www.facebook.com/GSTTODAYBYPRADEEPJAIN/as well as follow us on twitter at https://www.twitter.com/@capradeepjain21and u may also follow us on Linkedin https://www.linkedin.com/in/ca-pradeep-jain-b6a31a16

Comments

GST provisions in case of Death of Sole Proprietor 156/2020-21

Post a Comment

Query