GST Authority clarifies on change/transfer in ownership of sole proprietorship

The Goods and Services Tax, GST Authority has 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. In a circular, Central Board of Indirect Taxes and Customs, CBIC said, that the transferee or the successor will 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. 

It said, the applicant will be required to mention the reason to obtain registration as death of the proprietor, in the registration form, GST REG-01 to be filed electronically in the common portal. The legal heir of the dead sole proprietor will be required to give application for cancellation of the existing registration. 

The GST Identification Number, 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. 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. In case of transfer of business on account of death of sole proprietor, the transferee  or successor will file Form GST ITC-02 in respect of



the registration to be cancelled. CBIC said, a mechanism has been specified for transferring unutilised input tax credit. 

In an another circular related to verification of applications for grant of new registration, the CBIC said there have been instances when registration gets cancelled due to one reason or any other reason, such businesses prefer to apply for new registration rather than applying for revocation of cancellation of registration. It said, there is possibility that such person might not have furnished requisite returns and not paid tax for the tax periods covered under the old or cancelled registration. 

It added that such persons would be required to pay all liabilities due from them for the relevant period in case they apply for revocation of cancellation of registration. Hence, to avoid payment of the tax liabilities, such persons may be using the route of applying for fresh registration. One can take separate registration on the same PAN in the same State.

CBIC has asked its officials to exercise due caution while processing such applications. It clarified that not applying for revocation of cancellation of registration will be deemed to be a deficiency and could be reason for rejection of application for new registration