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Transfer of ITC in Case of Death of Sole Proprietor

Transfer of ITC in Case of Death of Sole Proprietor
 
The Central Board of Indirect Taxes and Customs (“CBIC”) vide its Circular No. 96/15/2019-GST dated 28th March, 2019 has clarified the procedure to be followed for transfer of input tax credit (ITC) in case of death of sole proprietor.
 
  1. Registration to be taken by transferee/successor:-It is clarified that the transferee/successor shall be liable to take registration from the date of transfer/succession and while filing registration application in FORM GST REG-01 electronically on the common portal, the applicant is required to mention the reason to obtain registration as “death of the proprietor”. It is pertinent to mention here that the succession of business cannot be concluded without obtaining separate registration for the transferor who has died as the PAN of deceased person cannot be used for running the proprietorship concern after death. However, in case where the successor is already registered under GST, whether it is permissible for the successor to skip registration formality for the business of deceased person? The answer is NO. This is for the reason that firstly there is no option available with the successor for mentioning the reason of obtaining registration as “death of proprietor” as successor is already registered. Moreover, as per the recent amendment made, a registered person has been given option to take multiple registrations within State irrespective of the fact that there are different business verticals or not. Consequently, in case the successor is already registered, the formality of taking new registration is mandatory to be complied. However, subsequently, the said new registration may be merged with the existing registration by the successor so as to reduce the compliances of filing GST returns.
 
  1. Cancellation of registration pertaining to death of proprietor:-The legal heirs are required to file cancellation of registration in FORM  GST REG-16 and the reason for cancellation is to be mentioned as “death of proprietor”. The GSTIN of transferee to whom the business has been transferred is also required to be mentioned to link the GSTIN of the transferor with the GSTIN of transferee.
 
  1. Manner of transfer of credit:-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 input tax credit specified in FORM GST ITC-02 shall be credited to his electronic credit ledger.
 
It is also to be noted 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.
 
 
The content of this GST update is for educational purpose only and not intended
for solicitation.
 

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