Transfer of input tax credit in case of death of sole proprietor – Circular no 96/15/2019 dt 28/03/2019
Issue: Whether section 18(3) of the CGST Act 2017 provides for transfer of input tax credit which remains unutilized to the transferee in case of death of the sole proprietor. As per rule 41(1) of the CGST Rules, 2017, the registered person (transferor of business) can file FORM GST ITC-02 electronically on the common portal along with a request for transfer of unutilized input tax credit lying in his electronic credit ledger to the transferee. Also the procedure for filing of return in case of death of a sole proprietor needs clarity.
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 –
Sec 22(3) – Registration liability of the transferee / successor:
Sec 29(1) – Cancellation of registration:
Input tax credit & liability
Transfer of credit – Sec 18(3) – Allows the registered person to transfer the unutilized input tax credit lying in his electronic credit ledger to the transferee as per rule 41 of the CGST Rules.
Person liable – Sec 85(1) – 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 case of transfer of business “in whole or in part, by sale, gift, lease, leave and license, hire or in any other manner whatsoever
Liability to pay tax- Sec 93(1) – The person, who continues business after his death, shall be liable to pay tax, interest or penalty due from such person under this Act.
Manner of transfer –
Rule 41(1) – 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.
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.