GST Compliance if converting from Proprietorship to Partnership

By | January 19, 2018
(Last Updated On: January 19, 2018)

Proprietorship to Partnership

We are converting from Proprietorship to Partnership.

1)What procedure we need to follow?

2)Whether our ITC will be eligible to be carried forwarded?

3)Any grey areas to be scrutinized?

Persons liable for registration.

Section 22 (3) of CGST Act 2017 :-

“Where a business carried on by a taxable person registered under this Act is transferred, whether on account of succession or otherwise, to another person as a going concern, 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.

Availability of credit in special circumstances .

Section 18 (3) of CGST Act 2017 :

Where there is a change in the constitution of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisions for transfer of liabilities, the said registered person shall be allowed to transfer the input tax credit which remains unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in such manner as may be prescribed. [ refer Rule 41 of CGST Rules 2017 ]

Transfer of credit on sale, merger, amalgamation, lease or transfer of a business

Rule 41 CGST Rules 2017:-

(1) A registered person shall, in the event of sale, merger, demerger, amalgamation, lease or transfer or change in the ownership of business for any reason, furnish the details of sale, merger, demerger, amalgamation, lease or transfer of business, in 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:

Provided that in the case of demerger, the input tax credit shall be apportioned in the ratio of the value of assets of the new units as specified in the demerger scheme.

 (2) The transferor shall also submit a copy of a certificate issued by a practicing chartered accountant or cost accountant certifying that the sale, merger, demerger, amalgamation, lease or transfer of business has been done with a specific provision for the transfer of liabilities.

(3) The transferee shall, on the common portal, accept the details so furnished by the transferor and, upon such acceptance, the unutilized credit specified in FORM GST ITC-02 shall be credited to his electronic credit ledger.

(4) The inputs and capital goods so transferred shall be duly accounted for by the transferee in his books of account.

 

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