GST India Forum – Goods and Services Tax (GST) in India › Forums › Bare Law › Sec 85 – Liability in case of transfer of business
- Adarsh MadrechaModeratorApril 13, 2017 at 11:33 PMPost count: 57Topics: 36
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(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.
(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.Priya MadrechaModeratorMay 23, 2017 at 1:04 PMPost count: 280Topics: 4
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This section deals with tax liability that may arise in case of transfer of business. It deals with the following situations:
Liability arising before the transfer of business as a whole or in part; and Liability arising post transfer of business as a whole or in part.
Such liability may arise on account of sale, gift, lease, leave and license, hire or in any other manner.
(i) Liability arising prior to transfer:
The provision applies when a taxable person who is liable to pay tax transfer his business either wholly or in part, which could be by way of: o Sale o Gift o Lease
o Leave and license o Hire or o In any other manner Tax liability: Both transferor and transferee will be jointly and severally liable for payment of taxes, interest and / penalty due upto the time of transfer of business (wholly or partly).
The joint and several liability will remain even if such amounts were determined and due before the transfer of business.
Interestingly even penal liability, which is quasi-criminal in nature, is sought to be fastened on the transferee, although he would not have been responsible for the non-payment of tax liability by the transferor prior to transfer of business
(ii) Liability arising post transfer
The tax, interest and / or penalty which is determined and which relates to the period, post transfer of business will clearly be the liability of the transferee of business.
It will remain the liability of the transferee whether or not the business is continued in the same name or otherwise.
As a process, in case the transferee is already an existing taxable person, he needs to apply for amendment of his registration certificate within the prescribed time incorporating the changes as to the acquisition of the business (whole or part).
85.3 Comparative analysis with the present regime
The liability in respect of transactions, post the date of transfer of business, viz., where the liability is fastened on the transferee is comparable to the current indirect tax provisions. However, in respect of joint and several liability of both, the transferor and transferee, for liabilities upto the date of transfer is comparable to certain State level VAT laws.
Q1. In case of transfer of business, who is liable to pay tax in respect of business transactions prior to such transfer?
Ans. Both the transferor and transferee of business (either wholly or partly) are jointly and severally liable to pay tax.
Q2. Whether such liability as mentioned above is applicable only for tax?
Ans. Such liability is applicable to interest and penalty also in addition to tax.
Q3. What are the types of business transfers covered in Section 85?
Ans. Following types of business transfers are covered in the subject provision:
(d) Leave and license;
(e) Hire; or
(f) In any other manner
Q4. To what extent the transferor of business is liable to pay tax / interest / penalties?
Ans. The transferor of business is wholly liable to pay tax / interest / penalties arisen (whether determined prior to transfer or post transfer) upto the date of transfer of business.
Q5. Who is liable to pay tax in respect of supplies made after the date of transfer of business?
Ans. The transferee of business is liable to pay tax after the date of transfer of business.
Q6. If the transferee carries on an existing business, what are the actions to be taken on transfer?
Ans. The transferee is required to make amendments in his registration to give effect to the business transfer
Q1. Transfer of business includes ……………
(c) Leave & License
(d) All the above
Ans: d) All the above
Q2. Who is liable to pay the tax in case of transfer of business?
(c) Both jointly or severally
Ans: c) Both jointly or severally
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