Goods And Services Tax

Clarification In Respect Of Transfer Of ITC In Case of Death Of Sole Proprietor

May 6, 2019
Team Taxmount

Which Provision will attract in respect of Transfer of ITC in case of Death

  1. Section 18(3) which provides transfer of input tax credit which remains unutilized.
  2. Section 29(1)(a) provides reason of transfer of business.
  3. Section 22(3) provides the transferee or the successor, as the case may be, shall be liable to be registered.
  4. Section 85(1) provides Liability in case of Transfer of Business.
  5. Rule 41(1) provides that the registered person (transferor of business) can file FORM GST ITC-02 electronically on the common portal along with a request for transfer of unutilized input tax credit lying in his electronic credit ledger to the transferee.

The Transferee or the successor, as the case may be, shall be liable to be registered with effect from the date of such transfer or succession, where a business is transferred to another person for any reasons including death of the proprietor. While filing application in FORM GST REG-01 electronically in the common portal the applicant is required to mention the reason to obtain registration as “death of the proprietor”.

The legal heirs is require to file an application for cancellation of registration in FORM GST REG-16 electronically on common portal on account of transfer of business for any reason including death of the proprietor. In FORM GST REG-16, reason for cancellation is required to be mentioned as “death of sole 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.

If the business is continued by any person being transferee or successor of business, it shall be construed as transfer of business. Section 18(3) 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 Rules.

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.

Step By Step Procudure

  1. The Transferee or the successor is require to take new Registration in FORM GST REG-01 electronically in the common portal the applicant is required to mention the reason to obtain registration as “death of the proprietor”.
  2. After that the Transferee or the successor is require to file FORM GST ITC-02 in respect of the registration which is required to be cancelled on account of death of the sole proprietor from his Common portal .
  3. At the last, the legal heirs in case of death of sole proprietor of a business, to file application for cancellation of registration in FORM GST REG-16 electronically on common portal.