LIABILITY TO PAY TAX IN CERTAIN CASES – PART-3

[Dr. Sanjiv Agarwal]

Chapter XXII of the Model Law contains Chapter XXII comprising of sections 108 to 115 which deal with liability to pay GST in eight special cases as follows:

Section	Liability
108	Liability in case of transfer of business
109	Liability in case of amalgamation / merger of companies
110	Liability in case of company in liquidation
111	Liability of partners of firm to pay tax
112	Liability of guardians, trustees etc
113	Liability of Court of Wards etc.
114	Special provision regarding liability to pay tax in certain cases (death, discontinued business, hindu undivided family or association of persons, on partition, dissolution of firm, termination of guardianship or trust etc).
115	Liability in other cases (discontinued business of HUF, firm, AOP; change in constitution of firm or AOP etc.)

This part covers sections 113 to 115 of the model GST law.

Liability of Court of Wards etc.

Where the estate of a taxable person owning a business in respect of which any tax,  interest or penalty is payable is under the control of the Court of Wards or Administrator  General or Official Trustee or  Receiver or Manager appointed under any order of a Court, the tax, interest or penalty shall be levied and recoverable from such Court of Wards/ Administrator General / Official Trustee / Receiver or Manager to the same extent as it would be determined and recoverable from a taxable person.

'Court of Wards' is not defined in GST law. However, according to section 3 of Indian Majority Act, 1875, Court of Wards is a department for the superintendence of the person and properties of disqualified proprietors.

The tax dues are recoverable from the Court of Wards as if it is conducting the     business for itself. It is recoverable from the estate of taxable person who is under  control of court of wards. Following persons shall be liable –

• Court of Wards
• Administrator general
• Official trustee
• Any receiver or manager
• Any other person by whatever name and the designation called, who in fact actually manages the business

Liability to pay tax in certain cases

Death

Where a person liable to pay tax dies, then, if the business is continued by his legal representative or any other person, such legal or any other person shall be liable to pay tax, interest or penalty due from such person. If the business is  discontinued whether before or after his death, his legal representative shall be liable to pay out of the estate of the deceased to the extent to which the capable of meeting the charge, tax, penalty or interest due from such person, whether such dues have been determined before his death but has remained as unpaid or is determined after his death. Taxable persons would include individuals and proprietorship concerns.

In following cases, recovery can not be made from the legal representative of deceased person  -

1. If business of deceased person is discontinued
2. There is no legal representative of deceased persons, and
3. Deceased person has not left any estate, capable of meeting the charge.

Hindu Undivided Family (HUF) or Association of Person (AOP)

Where a taxable person is liable to pay tax is HUF or AOP and the property of  HUF or AOP is partitioned among various members or groups of members, each  member shall jointly and severally be liable to pay the tax, interest or penalty due from the taxable person up to the time of partition whether such dues has been determined before partition but has remained unpaid or is determined after the partition.

Dissolution of a Firm

Where a taxable person liable to pay tax is a firm and the firm is dissolved, then every person was partner shall jointly and severally be liable to pay the tax, interest or penalty up to the time of dissolution whether such tax, interest or penalty has been determined before the dissolution but has remained unpaid or is determined after dissolution firm would include a LLP.

Guardian / Trustee

Where a taxable person liable to pay tax is the guardian of a ward on whose behalf the business is carried on by the guardian or a trustee who carries on the business under a trust for a beneficiary, if the guardianship or trust is terminated, the ward or, as the case may be, the beneficiary shall be liable to pay the tax, interest or penalty due from the taxable person up to the time the termination of the guardianship or trust whether such dues have been determined before the termination of the guardianship or trust but has remained as unpaid or is determined after such termination.

Liability in other cases

Discontinued Business

Where a firm or AOP or HUF has discontinued the business, the tax payable by such  entity up to the date of discontinuance may be determined as if no such discontinuance has taken place. Every person who was at the time of discontinuance, a partner of firm or member of AOP / HUF notwithstanding such discontinuance shall be liable jointly and severally for the payment of tax, interest or penalty whether determined prior to or after such discontinuance as if every such partner/member were himself a taxable person.

Change in constitution of firm or AOP

Where a change has occurred in the constitution of a firm or an association of persons, the partners of the firm or the members of the association as it existed before and as it exists after the reconstitution, shall without prejudice to the provisions of section111, jointly and severally be liable to pay the due from such firm or association for any period before its reconstitution.

Dissolution of AOP or partition of business of HUF

Where the taxable person who is an association of person is dissolved or where  taxable person who is a HUF has effected partition with respect to its business, the tax payable shall be determined as if no such dissolution or partition has taken place.

Further, any member who was at the time of such dissolution of AOP or partition of HUF, shall be liable jointly and severally for payment of tax, interest and penalty  imposed and payable, irrespective of such dissolution or partition, payable by such  AOP or HUF. Such tax, interest or penalty may be determined prior to or after dissolution of AOP or partition of HUF. Such members of AOP of HUF would be considered as taxable person themselves.