GST Jamku AILiability in case of transfer of business.
Section 85(1)
Where a taxable person, liable to pay tax under this Act, transfers his business in whole or in part, by sale, gift, lease, leave and license, hire or in any other manner whatsoever, the taxable person and the person to whom the business is so transferred shall, jointly and severally, be liable wholly or to the extent of such transfer, to pay the tax, interest or any penalty due from the taxable person upto the time of such transfer, whether such tax, interest or penalty has been determined before such transfer, but has remained unpaid or is determined thereafter.
When a person, who is obligated to pay taxes according to the Act, decides to transfer their business—whether it be the entire business or just a part of it—through sale, gift, lease, leave and license, hire, or any other method, certain liabilities come into play.
Joint and Several Liability Both the person transferring the business (referred to as the taxable person) and the recipient of the business share joint and several liability. This means they are collectively responsible, either entirely or to the extent of the transfer, for settling any outstanding tax, interest, or penalties owed by the taxable person up to the point of transfer.
Timing of Tax Determination It's important to note that this liability extends to situations where the tax, interest, or penalty has been determined before the business transfer. Whether the amount is determined prior to the transfer but remains unpaid or is determined after the transfer, the obligation to settle these financial aspects persists.
Conclusion In essence, Section 85(1) seeks to ensure that the transfer of a business does not absolve the parties involved from their tax responsibilities. The joint and several liability provision underscores the shared commitment to fulfilling any outstanding financial obligations related to the taxable person's business activities up to the transfer point. Understanding these obligations is vital for individuals engaged in business transfers to navigate the legal and financial landscape effectively.
Section 85(2)
Where the transferee of a business referred to in sub-section (1) carries on such business either in his own name or in some other name, he shall be liable to pay tax on the supply of goods or services or both effected by him with effect from the date of such transfer and shall, if he is a registered person under this Act, apply within the prescribed time for amendment of his certificate of registration.
When a business is transferred, it's crucial to understand the liability associated with the transfer. Section 85(2) addresses the tax implications in such cases.
Key Provision
According to Section 85(2), if the transferee of a business (as mentioned in sub-section 1) continues to operate the business under his own name or a different name, he becomes responsible for paying taxes on the supply of goods or services. This responsibility takes effect from the date of the business transfer.
Tax Liability and Registered Persons
If the transferee is a registered person under the relevant Act, it is mandatory for them to apply for an amendment to their certificate of registration within the prescribed time. This ensures that their registration reflects the changes resulting from the business transfer.
In summary, Section 85(2) outlines the tax obligations that come into play when a business is transferred, emphasizing the importance of timely registration amendments for those registered under the Act.