It is a myth that with the dead bodies all sins and goods are buried behind. No, some left!
Today, in this article we will discuss the facts on GST in case of death and dissolution of the taxpayer. In our previous article, we have cover offenses ad liabilities under GST.
So, the very first point that rises here is the GST Liability after the death of the Taxpayer-
1. GST Liability in Case of Death of the Taxpayer-
If in case the taxpayer is dead, then the legal representative of the deceased will pay the GST liability to arise in GST and the business is carried on by legal representative. In addition to this, if the business is discontinued before or after the death of the taxpayer, then the legal heir is liable to pay the due amount.
However, this does not mean that the personal property of the legal heir will get attached to it but, the legal heir will be liable to pay out the dues from the estate of the deceased only to the extent of the estate which is capable of meeting the due amount. The legal heirs are not personally liable to the pending dues.
Lets us understand this with an example –
Mr. Mukesh sells readymade clothes in his shop. He was liable to pay Rs 1, 00,000 as GST. But he passes away and his daughter takes over the shop. Then, his daughter is liable to pay the pending amount of Rs 1, 00,000.
However, if she inherits Rs 70,000 and closes down the shop after her father’s death, then she would be liable to pay Rs 70,000 as the tax and she cannot be held liable for the balance Rs 30,000 and since it is beyond the inherited amount.
2. GST Liability in case of Company Liquidation
In case, when the company is being wound up to due to its own motion or in under the orders of court then the liquidator must intimate the commissioner regarding his appointment within 30 days. The commissioner has the duty to inform the liquidator within a time period of 3 months of the amount of tax/interest/ penalty a company ought to pay.
Furthermore, if the director proves the commissioner that the non- payment was not his fault and not due to his negligence or breach of duty due on his or her part then he/she will not be liable to get punished.
Let’s us understand with an example-
XYZ Pvt Ltd Co. (with 3 directors A, B, C) take a call to wind up its affairs on 1st August 2018 after suffering from huge losses. They appoint Mr. K as liquidator on 5th August 2018. Mr. K must then inform the Commissioner regarding his appointment within 30 days, i.e., 5th September 2018.
Let’s assume the commissioner has done his duty and informs the liquidator on 20th November 2018 (within 3 months) that XYZ Co. owes Rs. 3, 00,000 taxes for 2017-18 & 2018-19.
XYZ Pvt Ltd Co. has around 3 months to pay the due i.e., till 20th February 2019. However, the company fails to pay. In this case, the 3 directors A, B & C will be held liable to pay the full amount. If A & B fail to pay then C alone will have to pay Rs. 3, 00,000.
Only if C can prove that the non-payment of taxes was not due to his personal negligence, then he will exempt from the liability of paying the company’s taxes.
3. GST Liability in case of Partnership firm‘s Dissolution
Up to the date of Dissolution, each partner will be held liable jointly or severally for any GST due amount.
4. GST Liability in case of HUF/AOP on Partition
In case of Hindu Undivided Family / Association of People is divided amongst the various members, then each member or group of members will be held liable for GST due till the time of partition, jointly and severally.
5. GST Liability in case the Trust is terminated
In case of trust or guardianship, a person who looks after the business of beneficiary and pays the tax under the GST is terminated then the beneficiary will be held liable for all the unpaid GST Dues.
6. GST Liability in case of Reconstitution of Firm or AOP
All the members or partners who were there before the reconstitution will be held liable jointly and severally for all dues before the date of reconstitution.
|Cases||Liabilities imposed on|
|Business transferred||Both the transferor and transferee|
|Agent and Principal||Both the agent and principal|
|Merger||Each co. liable for own dues|
|Liquidation||Co. and then directors|
|Guardianship/ trust||Both guardian/trustee and minor|
|Court of wards||Taxpayer and court of wards|
|Death of taxpayer||Legal heir|
|Dissolution of HUF/AOP/Firm||All members/partners|
We have summarized the GST liability in case of death and dissolution of the taxpayer in certain cases. Thus, we have found that in any case due amounts of GST will be recovered from the taxpayer directly or indirectly ( Legal heir/ representatives).
You can Also Apply for GST Registration through Corpbiz.
Read our article:Cancellation of GST Registration in India: Full guide