Circular No. 96/15/2019-GST
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F. No. CBEC-20/16/04/2018 – GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
***
New Delhi, Dated the 28th March, 2019
To,
The Principal Chief Commissioners / Chief Commissioners / Principal Commissioners /
Commissioners of Central Tax (All)
The Principal Director Generals / Director Generals (All)
Madam/Sir,
Subject: Clarification in respect of transfer of input tax credit in case of death of sole
proprietor – Reg.
Doubts have been raised whether sub-section (3) of section 18 of the Central Goods and
Services Tax Act, 2017 (hereinafter referred to as „CGST Act‟) provides for transfer of input tax
credit which remains unutilized to the transferee in case of death of the sole proprietor. As per
sub-rule (1) of rule 41 of the Central Goods and Services Rules, 2017 (hereinafter referred to as
„CGST Rules‟), 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. Further, clarification has also been
sought regarding procedure of filing of FORM GST ITC-02 in case of death of the sole
proprietor. In order to clarify these issues and to ensure uniformity in the implementation of the
provisions of the law, the Board, in exercise of its powers conferred by section 168 (1) of the
CGST Act, hereby clarifies the issues raised as below.
2.
Clause (a) of sub-section (1) of section 29 of the CGST Act provides that reason of
transfer of business includes “death of the proprietor”. Similarly, for uniformity and for the
purpose of sub-section (3) of section 18, sub-section (3) of section 22, sub-section (1) of section
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85 of the CGST Act and sub-rule (1) of rule 41 of the CGST Rules, it is clarified that transfer or
change in the ownership of business will include transfer or change in the ownership of business
due to death of the sole proprietor.
3.
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 –
a.
Registration liability of the transferee / successor: As per provisions of sub-section (3)
of section 22 of the CGST Act, the transferee or the successor, as the case may be, shall
be liable to be registered with effect from the date of such transfer or succession, where a
business is transferred to another person for any reasons including death of the proprietor.
While filing application in FORM GST REG-01 electronically in the common portal the
applicant is required to mention the reason to obtain registration as “death of the
proprietor”.
b.
Cancellation of registration on account of death of the proprietor: Clause (a) of sub-
section (1) of section 29 of the CGST Act, allows the legal heirs in case of death of sole
proprietor of a business, to file application for cancellation of registration in FORM GST
REG-16 electronically on common portal on account of transfer of business for any
reason including death of the proprietor. In FORM GST REG-16, reason for
cancellation is required to be mentioned as “death of sole proprietor”. The GSTIN of
transferee to whom the business has been transferred is also required to be mentioned to
link the GSTIN of the transferor with the GSTIN of transferee.
c.
Transfer of input tax credit and liability: In case of death of sole proprietor, if the
business is continued by any person being transferee or successor of business, it shall be
construed as transfer of business. Sub-section (3) of section 18 of the CGST Act, allows
the registered person to transfer the unutilized input tax credit lying in his electronic
credit ledger to the transferee in the manner prescribed in rule 41 of the CGST Rules,
where there is specific provision for transfer of liabilities. As per sub-section (1) of
section 85 of the CGST Act, 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 cases
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of transfer of business “in whole or in part, by sale, gift, lease, leave and license, hire or
in any other manner whatsoever”. Furthermore, sub-section (1) of section 93 of the
CGST Act provides that where a person, liable to pay tax, interest or penalty under the
CGST Act, dies, then the person who continues business after his death, shall be liable to
pay tax, interest or penalty due from such person under this Act. It is therefore clarified
that the transferee / successor shall be liable to pay any tax, interest or any penalty due
from the transferor in cases of transfer of business due to death of sole proprietor.
d.
Manner of transfer of credit: As per sub-rule (1) of rule 41 of the CGST Rules, a
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. In case of transfer of
business on account of death of sole proprietor, the transferee / successor shall file
FORM GST ITC-02 in respect of the registration which is required to be cancelled on
account of death of the sole proprietor. 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.
4. It is requested that suitable trade notices may be issued to publicize the contents of this
circular.
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Difficulty if any, in the implementation of this Circular may be brought to the notice of
the Board. Hindi version would follow.
(Upender Gupta)
Principal Commissioner (GST)
