GST on Partition of HUF, Goods and Services Tax - GST

[Krishna Murthy]

Dear Experts,

A business in trading of Gold Ornaments was being run by HUF. On demise of Karta, the remaining members of the family decided to divide the assets along with Stock in Trade. A Partition Deed is entered among them to this effect. Since, the assets include Stock in Trade ie Gold Ornaments, the same would also be divided among members and each member gets some portion of Gold Ornaments. What is the GST effect on the transfer of such Stock in Trade.

I am of the view that partition of HUF does not fall within the ambit of Supply u/s 7 of GST Act. Though there is transfer of Stock in Trade, there is no consideration paid and such transfer is not in the course of FURTHERANCE OF BUSINESS. There cannot be any business between entity and its members. They have just taken the right available to them in such HUF, which is obtained by them by birth.

But the assessing officer is of the view that though there is no consideration, it is a Schedule I transaction. I am of the view that a transaction should fall within the scope of Supply, only then the same can be referred to Schedule I. Without being a Supply, one cannot resort to Schedule I to decide the transaction. Since, the present case is out of purview of Supply u/s 7, no GST applicable on transfer of assets on Partition of HUF. Any views on this matter please.

One may also argue that the present case would fall with in the ambit of Clause 1 of Schedule I of CGST Act ie Permanent disposal of business assets on which ITC has been availed. In the present case there was no ITC claimed because the Stock in Trade pertains to pre GST era.

 

Posts / Replies

[Shilpi Jain]

Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business:

The above is the schedule I entry. You are right that even if the above transaction is considered as transfer, it will still not be liable to GST as it is not in the course of business.

The transaction should not be liable to GST.

[Krishna Murthy]

Thank You Madam for your timely reply. In this matter, I also bring to your notice to Para 4(c) of Schedule II.

(c) where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless-

(i) the business is transferred as a going concern to another person; or

(ii) the business is carried on by a personal representative who is deemed to be a taxable person.

There is a deeming fixture in the above Clause (c) on ceasing to be taxable person. Would this have effect to be treated as in the furtherance of business while distributing assets on Partition of HUF.

[Ganeshan Kalyani]

Is this not a going concern?

[Krishna Murthy]

On partition of HUF (only complete partition is recognised under Income Tax Act and partial partition is not recognised under Income Tax Act), the members gets their share (equally for all the family members) in the assets of HUF and thus the HUF gets dissolved. Technically, it means that HUF ceases to be a taxable person. Hence, Para 4(c) of Schedule II comes into play. This would be treated as in furtherance of business accordingly.