Section 85 LIABILITY TO PAY IN CASE OF TRANSFER OF BUSINESS - GST Ready Reckoner - GST

LIABILITY TO PAY IN CASE OF TRANSFER OF BUSINESS [SECTION 85 OF THE CGST ACT] Liability Of transferor Transferee Severally Jointly in case of transfer of business Where a taxable person, liable to pay tax under CGST Act, transfers his business [this includes transfer or change in the ownership of business due to death of the sole proprietor in whole or in part, by sale, gift, lease, leave and license, hire or in any other manner whatsoever, then the taxable person and the person to whom the business is so transferred shall , jointly and severally, be liable wholly or to the extent of such transfer, to pay the tax, interest or any penalty due from the taxable person upto the time of such transfer , whether such tax, interest or penalty has been determined before such transfer, but has remained unpaid or is determined thereafter [ Section 85(1) ]. Liability of transferee in case of death of sole proprietor Where the transferee of a business carries on such business either in his own name or in some other name, he shall be liable to pay tax on the supply of goods or services or both effected by him with effect from the date of such transfer [ Section 85(2) ]. Further, if he is a registered person under this Act, he shall apply within the prescribed time for amendment of his certificate of registration [Section 85(2)]. The transferee 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. [Circular No. 96/15/2019-GST Dated 28 th March, 2019] Example 1 : C trading co crosses threshold of 20 lakhs and becomes liable for registration in feb 2020. howsoever it does not take registration for 7 months . after words it transfer its business to O trading Co. Answer - C Trading O Trading Co are both are severally jointly liable for tax liability up to the time of transfer . Howsoever C trading Co is not liable for tax liability for the supplies made after transfer. Example 2 : A ltd has sold whole of business to R ltd Tax, interest penalty is due from A ltd up to time of such transfer. Answer - A ltd R ltd are both Jointly Severally liable to the extent of such transfer to pay tax , interest penalty due from A ltd up to the time of such transfer .