Cancellation of GST Registration in Case of Death of Sole Proprietor - GST Ready Reckoner - GST

Cancellation of GST Registration in Case of Death of Sole Proprietor Cancellation of GST Registration in Case of Death of Sole Proprietor : In accordance with Section 93(1) of the GST Act , where a person liable to pay tax, interest, penalty under this act, dies than- If a business carried on by the person is continued after his death by his legal representative or any other person, such legal representative or other person liable to pay tax, interest, penalty due from such person under this act, and if the business carried on by the person discontinued , whether before or after his death, his legal representative shall be liable to pay, out of estate is capable of meeting the charge, the tax, interest, penalty due from such person under this act. whether such tax, interest, penalty has been determined before his death but has remained unpaid or is determined after his death. A legal heir, may transfer the ITC to a new entity in case of death of sole proprietor. In such a case, legal heir needs to get a new registration under GST and transfer the ITC through FORM GST ITC-02 to this new entity. 1. 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. 2. 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 (appointed by will) guardian. The legal guardian needs to be appointed or nominated by the competent authority (Normally District Judge). Legal guardian can take decisions on behalf of minor legal heir/ successor and he can also appoint authorized signatory for this purpose. 3. Legal heir has to apply for new registration. 4. 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 form and has no relation with cancellation of the sole proprietorship firm. 5. 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 your jurisdiction. Next, the newly added authorized signatory need to login to the GST Portal available at https://www.gst.gov.in/ and login using the First time login link. He/ She will be forced to change your 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. 6. 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. Clarification in respect of transfer of input tax credit in case of death of sole proprietor [ Circular No. 96 / 15 / 2019 -GST ] In case of death of sole proprietor if the business is continued by any person being transferee or successor, the input tax credit which remains un-utilized in the electronic credit ledger is allowed to be transferred to the transferee as per provisions and in the manner stated below Registration liability of the transferee / successor: As per provisions of section 22(3) of the CGST Act, 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 . Cancellation of registration on account of death of the proprietor: section 29(1)(a) of the CGST Act, allows 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 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. Transfer of input tax credit and liability: In case of death of sole proprietor, 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, where there is specific provision for transfer of liabilities. As per Section 85(1) of the CGST Act, the transferor and the transferee / successor shall jointly and severally be liable to pay any tax, interest or any penalty due from the transferor in cases of transfer of business in whole or in part, by sale, gift, lease, leave and license, hire or in any other manner whatsoever . Furthermore, Section 93(1) of the CGST Act 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. Manner of transfer of credit: As per rule 41(1) of the CGST Rules, a registered person shall file FORM GST ITC-02 electronically on the common portal with a request for transfer of unutilized input tax credit 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 input tax credit specified in FORM GST ITC-02 shall be credited to his electronic credit ledger. Case Law A.H. MARBLE CRAFTS VERSUS THE COMMISSIONER TAX ( 2022 (10) TMI 504 - RAJASTHAN HIGH COURT ) Issue : The issues in this case were the inaction of the respondent in opening the portal for the petitioner to complete the tax liability under Section 93 of the CGST Act, 2017, and the non-acceptance of the prayer for cancellation and transfer of the GST registration due to the information regarding the death of the proprietor not being forwarded electronically in the prescribed FORM GST REG-16. Decision : The court directed the respondents to activate the common portal and allow the petitioner to upload the appropriate information in FORM REG-16 within the next 30 days. Once the information is provided, the GSTIN number of the transferee and the transferor shall be linked as per clause 3(b) of the Circular dated 28.03.2019.