ALL ABOUT GST IN CASE OF DEATH OF PROPRIETOR

In case of the death of a proprietor, there is no second legal personality between the business and the person. This has significant implications for Goods and Services Tax (GST) compliance. GST regulations regarding the death of the owner are vital to legal heirs, legal representatives, and businesses to ensure a seamless transition, not to suffer any penalties, and stay in line with Indian tax laws.

Understanding of GST Liability in Case of Death of the Proprietor

A single proprietorship in the GST regime is not a distinct legal person. The business and the owner are regarded as one. Consequently, the GST registration, which is attached to the PAN of the deceased person, cannot be carried on permanently when the proprietor dies.

The responsibility of the payment of tax, filing of GST returns, and compliance before GST becomes the responsibility of the legal heir or successor. The GST legislation mandates that proper measures have to be undertaken to cancel either the available GST registration or change it to the name of the successor.

Cancellation of GST Registration in Case of Death of Proprietor

A GST registration tied to an individual is to be cancelled upon the owner’s passing. The legal heir or legal representative performs the process.

1. Cancellation application – The legal heir is required to obtain a cancellation of GST registration by filing an application in Form GST REG-16 within 30 days of the death of the proprietor.
2. Details to be submitted – The form will need stock, liability, and tax dues details, and transfer of business details, where applicable.
3. Documents required – Death certificate of the proprietor, succession certificate/legal heir certificate, PAN of legal heir and evidence of transfer of business (where applicable).
4. Settlement of liability – All outstanding tax liability, GST returns and dues should be settled before cancellation.

This guarantees that registration of GST is valid and any subsequent sanctions imposed on the GSTIN of the deceased person are not enforced.

Transmission of GST Registration to the Legal Heir

In case the legal heir or successor wishes to continue with the business, then the GST registration can be transferred as opposed to full cancellation. This is referred to as the amendment of GST registration because of the death of the owner.

• Application process – The application to amend GST registration should be done by the legal heir in Form GST REG-14.
• Approval of authority – The GST officer confirms the authorization of the transfer and approves the transfer in Form GST REG-15.
• Carry on business – On approval, the legal heir is allowed to use the same GSTIN name in the business.

This provision makes continuity of the business uninterrupted without interruption in due compliance with GST.

Filing of Pending GST Returns After Death of Proprietor

All the pending GST returns until the date of death should be filed even after the death of the proprietor.

1. Responsibility of legal heir – The legal heir or legal representative gets the responsibility of filing the pending GST returns on behalf of the deceased.
2. Clearance of tax dues – Before cancellation or transfer of registration, any GST outstanding liability has to be paid.
3. Avoid fines – Timely filing will mean that there are no late charges, fines or interest accrued on the GSTIN.

In such a way, the heirs must timely verify the compliance level with GST and satisfy all the formalities.

Transfer of Input Tax Credit (ITC)

Treatment of the input tax credit (ITC), is one of the key elements of GST in the event of death of the proprietor.

1. On cancellation – The ITC balance lapses in the event of cancellation of the GST registration without transfer of the business.
2. On transfer of business – Transfer of ITC in case of transfer of business to the legal heir may be affected under Rule 41 of CGST Rules.
3. Procedure – The legal heir should work out periodically in Form GST ITC-02 to transfer the input tax credit that remains unused to the new GST registration.

This is to make sure that important ITC is not lost in business succession.

GST Implications on Sale of Business Assets

When the legal heir is not interested in running the business and chooses to sell the assets of the deceased proprietor, then GST can be applied.

1. Taxable supply – Sale of stock, machinery or any other asset is a taxable supply under GST.
2. Payment of tax – Such transactions shall have to be paid tax under the GSTIN of the legal heir prior to cancellation.
3. Exemptions – When the business assets are transferred during succession (not sale), then it is not subject to supply under GST and no tax is payable.

Jurisdiction of GST Officer in Case of Death

Jurisdictional GST officer also has a significant role in giving consent on cancellation, transfer or amendment of GST registration. Legal heirs have to make sure that they communicate with the officer properly, provide all the necessary documents and get approval to prevent additional tensions in future.

Key Documents Required

In order to meet the formalities of GST after the death of the proprietor, the documents usually required include the following:

1. Death certificate of the owner.
2. Succession certificate or legal heir certificate.
3. PAN and Aadhaar of the legal heir.
4. Evidence of business transfer (where appropriate)
5. Application forms (REG-16, REG-14, ITC-02, as applicable)

Practical Steps for Legal Heirs

1. Gather the death certificate and succession paperwork.
2. Look at outstanding GST returns and tax outstanding.
3. Choose between cancellation and transfer of a GST registration.
4. Comments: File the application needed ( REG-16 to cancel or REG-14 to transfer ).
5. Transfer ITC under ITC-02 in case business is being continued.
6. Get permission from the GST officer.

Conclusion

GST on the death of the proprietor needs an urgent response from the legal heirs or successors. Because of sole proprietorship and the owner is the same physically and legally, the registration of GST cannot go on with the name of the deceased. In case of continuity of business, legal heirs should cancel the registration of GST or transfer it to their name.

Compliance refers to the filing of pending GST returns, payment of dues, transfer of ITC and proper documentation. The steps taken in time will not only prevent penalties but also make the transition of the business easy.

Lawyers and GST experts are capable of advising in a context-specific manner in case of the need for professional help in the process of managing GST compliance following the death of a proprietor.