The GST authorities have clarified that transfer or change in the ownership of business would happen in the case of death of the sole proprietor and would include the transfer or change in the ownership of a business.
Central Board of Indirect Taxes and Customs, CBIC said through a circular that in the case of business transfer, where the business is transferred to another person for any reason including the death of the proprietor, the transferee or the successor would be liable to be got registered effective the date of such transfer or succession.
The Rule says that the applicant would have to mention the reason for obtaining registration as ‘death of the proprietor’ in the registration form. It is the form GST REG-01 which is required to be filed electronically through the common portal. In the case of the death of the sole proprietor, the legal heir is supposed to forward an application for cancellation of the existing registration.
In the case of Transfer of proprietorship from the transferor to the transferee, GSTIN, the GST identification number of the transferee is required to be mentioned so as to get the GSTIN of the transferor linked with the GSTIN of the transferee.
If a transferee or successor of business continues the business of a deceased sole proprietor, it would be considered as a transfer of business. In such a case where the transferee would be continuing the business of the deceased sole proprietor, the transferee or successor is supposed to file form GST ITC-02 to get the old registration cancelled.
CBIC said that there is a specified mechanism for transferring unutilised input tax credit.
Another circular has been rolled out by CBIC for the verification of such applications which seeks a grant of new registration in the cases where the registration gets cancelled due to one reason or another. Such business rather than applying for revocation of cancellation of registration would prefer applying for new registration.
The circular mentions that there is a possibility that such persons might have avoided the requisite returns and not paid tax for the tax periods covered under the old or cancelled registration. It is again mentioned that in the case of revocation of cancellation of registration, the transferee would be supposed to be paying all the tax liabilities due from them for the relevant period. The payment of such tax liabilities could be avoided by applying for fresh registration. Provision is that one could get separately registered on the same PAN in the same state.
The officials have been strictly directed by the CBIC to maintain due caution while processing such applications. It has also been clarified by CBIC that in the cases where the revocation or cancellation of registration is not applied and application is filed for a fresh registration, would be considered as a deficiency and could lead to the cancellation or rejection of the application for new registration.
