Article explains Steps to be followed for Conversion of Proprietorship concern into Partnership Firm, Steps for transferring unutilised ITC to the partnership firm from proprietorship, Documents required for incorporating a partnership firm and Documents required for Certificate of Registration of Partnership.

Steps to be followed for Conversion of Proprietorship concern into Partnership Firm

1. Drafting of Partnership Deed (It Includes the Declaration about Conversion)

2. Filing of Returns by Proprietorship & Partnership Firm

3. The taxpayer has to select the date from which the registration of proprietorship is to be cancelled and new GST registration of Partnership is applied. The taxpayer has to make sure that both the above dates are the same, and this will be the effective date for GST registration of partnership.

4. Therefore, the proprietorship entity has to file all GST returns till the new GST registration date and pay all the pending dues. The partnership firm has to start filing the GST returns from the date of new GST registration.

5. Apply for GSTIN & PAN of Partnership and then open Current Bank A/c

6. Transfer of Business to Partnership Firm

  • Transfer of stock or other asset is exempt under GST
  • The transfer of a going concern is exempted as per the CGST (Rate) notification 12/2017.
  • As per Schedule-2 of CGST/SGST Act, sale of stock or other assets where such stock/other assets moved from existing firm to new firm (in case of re-structuring of business) shall not be deemed as supply of goods in the course or furtherance of business subject to the condition that existing firm ceases to be a taxable person after such re-structuring.
  • CGST Exemption Schedule for services as set out in CGST Rate Notification-12/2017 has provided an entry for exemption of Services by way of transfer of a going concern, as a whole or an independent part thereof.
  • By combined reading of both the provisions, it is inferred that transfer of a going concern as a whole or an independent thereof shall not be taxable under GST

7. Transfer of Unutilized ITC to partnership-  After completing the filing of the pending returns, the taxpayer can transfer the unutilised ITC to the partnership firm.

8. Cancellation of GSTIN of Proprietorship – File GST REG 16 citing reason “Changing the company’s legal framework” and put New GST of partnership.

Conversion of Proprietorship concern into Partnership Firm

Steps for transferring unutilised ITC to the partnership firm from proprietorship Concern :

  • Form GST ITC-02 has to be filed by the proprietorship Concen to transfer the unutilised ITC to the electronic credit ledger of the partnership firm.
  • Proprietorship entity shall also file a copy of a certificate issued by a practising Chartered Accountant or Cost Accountant certifying that the business has been transferred with a specific provision for the transfer of liabilities.
  • The partnership Firm shall accept the information so provided by the proprietorship company on the GST portal ( and, upon such approval, the unutilised ITC specified in Form GST ITC-02 shall be credited to electronic credit ledger of partnership Firm.
  • The inputs and capital goods, thus transferred, shall be adequately accounted for in its books of account by the partnership firm.
  • Proprietorship entity  shall Apply for Refund of Balance in E-Cash Ledger by filling Form RFD-01

Documents required for incorporating a partnership firm

1. Business proof – Electricity Bill/ Telephone Bill of the registered office address

2. ID Proof

  • Self- attested copy of Aadhar Card, Voter ID/ Passport/ Driving License of all partners.
  • A self-attested copy of PAN Card of all partners

3. Details about the sole Proprietors Business

If the proprietorship firm is licensed under GST or any other registrations obtained, forms need to be submitted to the concerned departments for change of status of the business

4. Statement of assets and liabilities- Updated statement of assets and liabilities certified by a CA.

Documents required for Certificate of Registration of Partnership

The documents required to be submitted to Registrar for registration of a Partnership Firm are:

1. Application for registration of partnership (Form 1)

2. Certified original copy of Partnership Deed.

3. Specimen of an affidavit certifying all the details mentioned in the partnership deed and documents are correct.

4. PAN Card and address proof of the partners.

5. Proof of principal place of business of the firm (ownership documents or rental/lease agreement).

If the registrar is satisfied with the documents, he will register the firm in the Register of Firms and issue a Certificate of Registration.

Register of Firms contains up-to-date information on all firms and can be viewed by anybody upon payment of certain fees.

Author Bio

Qualification: CA in Practice
Location: Ahmedabad, Gujarat, India
Member Since: 24 Jun 2021 | Total Posts: 18
Hi there!! Myself CA Mohit Loonkar a practising Chartered Accountant from Ahmedabad. I can be reached at LinkedIn: View Full Profile

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February 2024