GST Jamku AISpecial provisions regarding liability to pay tax, interest or penalty in certain cases.
Section 93(1)
Save as otherwise provided in the Insolvency and Bankruptcy Code, 2016 (31 of 2016), where a person, liable to pay tax, interest or penalty under this Act, dies, then—
(a) if a business carried on by the person is continued after his death by his legal representative or any other person, such legal representative or other person, shall be liable to pay tax, interest or penalty due from such person under this Act; and
(b) if the business carried on by the person is discontinued, whether before or after his death, his legal representative shall be liable to pay, out of the estate of the deceased, to the extent to which the estate is capable of meeting the charge, the tax, interest or penalty due from such person under this Act,
whether such tax, interest or penalty has been determined before his death but has remained unpaid or is determined after his death.
In certain situations, the responsibility for paying taxes, interest, or penalties may extend even after an individual's death. Section 93(1) outlines the specific provisions regarding this matter.
Continuation of Business after Death If a person who is obligated to pay taxes, interest, or penalties under the Act passes away, and their business is carried on by their legal representative or another individual, certain obligations persist.
(a) Continued Business: In cases where the business is continued after the person's death, the legal representative or the designated individual taking over the business becomes responsible for settling the outstanding tax, interest, or penalty under the Act.
Discontinuation of Business On the other hand, if the business ceases operations, either before or after the individual's death, a different set of rules comes into play.
(b) Discontinued Business: If the business stops, the legal representative of the deceased becomes liable to pay the outstanding tax, interest, or penalty from the estate left behind. The extent of this liability is limited to the assets available in the estate, ensuring a fair distribution of the financial responsibility.
This applies regardless of whether the tax, interest, or penalty was determined before the person's death but remained unpaid, or if it was determined posthumously. The overarching aim is to ensure that the financial obligations under the Act are met, providing clarity and accountability in the aftermath of an individual's demise.
Section 93(2)
Save as otherwise provided in the Insolvency and Bankruptcy Code, 2016 (31 of 2016), where a taxable person, liable to pay tax, interest or penalty under this Act, is a Hindu Undivided Family or an association of persons and the property of the Hindu Undivided Family or the association of persons is partitioned amongst the various members or groups of members, then, each member or group of members shall, jointly and severally, be liable to pay the tax, interest or penalty due from the taxable person under this Act up to the time of the partition whether such tax, penalty or interest has been determined before partition but has remained unpaid or is determined after the partition.
In certain situations, special provisions come into play when it comes to the responsibility of paying taxes, interest, or penalties. Section 93(2) outlines these provisions.
The Scenario If a person, who is supposed to pay taxes, interest, or penalties under this Act, belongs to a Hindu Undivided Family or an association of persons, and the property of this family or association is divided among its members or groups of members, a specific set of rules apply.
Joint Responsibility In such cases, each member or group of members is collectively and individually responsible for settling the tax, interest, or penalty owed by the taxable person under this Act. This responsibility extends up to the time of the partition.
Important Note These rules apply unless stated otherwise in the Insolvency and Bankruptcy Code, 2016 (31 of 2016). Even if the tax, penalty, or interest was determined before the partition, all members remain jointly and severally liable for the amount, whether paid or unpaid at the time of the partition.
Section 93(3)
Save as otherwise provided in the Insolvency and Bankruptcy Code, 2016 (31 of 2016), where a taxable person, liable to pay tax, interest or penalty under this Act, is a firm, and the firm is dissolved, then, every person who was a partner shall, jointly and severally, be liable to pay the tax, interest or penalty due from the firm under this Act up to the time of dissolution whether such tax, interest or penalty has been determined before the dissolution, but has remained unpaid or is determined after dissolution.
In certain situations, there are special rules concerning who is responsible for paying taxes, interest, or penalties. Let's take a closer look at Section 93(3) of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), which outlines these provisions.
Dissolution of a Firm If a taxable person, who is supposed to pay taxes, interest, or penalties under this Act, is part of a firm, and that firm is dissolved, there are specific rules to determine liability. According to Section 93(3), every person who was a partner in the dissolved firm is jointly and severally liable to pay the taxes, interest, or penalties owed by the firm under this Act. This responsibility extends up to the time of dissolution.
Conditions for Liability It's essential to note that this liability exists unless there are different provisions outlined in the Insolvency and Bankruptcy Code, 2016 (31 of 2016). So, even if the taxes, interest, or penalties were determined before the dissolution but remained unpaid, or if they are determined after dissolution, the partners are still held accountable.
In simpler terms, if a firm is dissolved and it owes money in taxes, interest, or penalties, the partners are collectively responsible for settling these obligations, regardless of when they were determined. This ensures a fair and accountable approach in cases of firm dissolution.
Section 93(4)
Save as otherwise provided in the Insolvency and Bankruptcy Code, 2016 (31 of 2016), where a taxable person liable to pay tax, interest or penalty under this Act,—
(a) is the guardian of a ward on whose behalf the business is carried on by the guardian; or
(b) is a trustee who carries on the business under a trust for a beneficiary,
then, if the guardianship or trust is terminated, the ward or the beneficiary shall be liable to pay the tax, interest or penalty due from the taxable person upto the time of the termination of the guardianship or trust, whether such tax, interest or penalty has been determined before the termination of guardianship or trust but has remained unpaid or is determined thereafter.
If a person liable to pay tax, interest, or penalty under this law happens to be the guardian of a ward, and the business is conducted on behalf of the ward by the guardian, special considerations come into play.
Trustees and Business under Trust
Similarly, if the liable person is a trustee managing a business under a trust for a beneficiary, specific rules apply.
Termination of Guardianship or Trust
The crucial point arises when the guardianship or trust comes to an end. In such cases, if the guardianship or trust is terminated:
(a) Guardian of a Ward
If the liable person is the guardian of a ward, the ward becomes responsible for paying the tax, interest, or penalty incurred by the taxable person up to the termination of the guardianship.
(b) Trustee for a Beneficiary
If the liable person is a trustee managing the business for a beneficiary, the responsibility for the outstanding tax, interest, or penalty also shifts to the beneficiary.
Timing of Determination
Importantly, this liability is applicable whether the tax, interest, or penalty has been determined before the termination of guardianship or trust and has remained unpaid or is determined thereafter.
In essence, Section 93(4) outlines a structured approach to handling tax liabilities in cases involving guardianships and trusts, ensuring that the responsibility is transferred appropriately when these arrangements come to an end.