In case of death of sole proprietor, Legal hair has to visit office of the Proper officer (Jurisdiction Officer) and submit the death sole proprietor along with the Succession Certificate before the Proper Officer as documentary evidence.
Proper Officer will add legal heir as the authorized signatory on the GST portal.
In case the successor is minor, he cannot be added as an authorized signatory. In such cases, minor successor needs to be represented by his legal/ natural/ testamentary (appointed by will) guardian .the legal guardian needs to appointed or nominated by the competent authority (Normally District Judge). Legal guardian can take decisions on behalf of minor legal heir/ successor and he can also appoint authorized signatory for this purpose.
Username and temporary password reset will be communicated to the e-mail address of the newly added authorized signatory as entered by the Tax officer in your jurisdiction. Next, the newly added authorized signatory needs to login to the GST portal available at http://www.gst.gov.in/and login using the first time login link. He/ She will be forced to change your username and password after first time login with the username and temporary password that was emailed on the newly added e-mail address of the Primary authorized signatory.
Get new registration
Legal heir has to apply new registration.
Legal heir or his/ her authorized signatory has to submit the application of registration and select the “Death of Proprietor” as reason of registration.
If the legal heir is already registered under GST, he needs not to take a new registration.
Transfer input tax Credit
Once the new registration is approved, legal heir has to apply for the transfer of ITC by filling FORM GST ITC-02 to new entity. However, there is no restriction on filling if ITC -02 pre or post cancellation of the sole proprietorship firm.
as per provision of section 18(3) where there is a change in the constitution of 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 unutilized in his electronic credit ledger such sold, merger, demerger, amalgamated, leased or transfer business in such manner as may be prescribed.
as per rule a registered person shall, in the event of sale, merger, demerger, amalgamation, lease per transfer or change in the owner ship of business for any reason, furnish the details of sale, merger, demerger, amalgamation, lease or transfer of business, in FORM GST ITC-02, electronically in the common portal along with a request for transfer of unutilized input tax Credit lying in his electronic credit ledger in transferee.
As per rule 41(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 t his electronic credit ledger.
If the transferor was under composition scheme, there is no need to file ITC -02
No tax payable on closing stock
As per section 29 (5) Every registered person whose registration is cancelled shall pay amount, by way debit in the electronic credit ledger or electronic cash ledger equivalent to the credit of input tax in respects of inputs held in stock and inputs contained in semi-finished or finished goods held in stock or capital goods or plant and machinery on the day immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher, calculated in such manner as may be prescribed. This provision is not applicable if the business is transferred as a going concern to another person.
As per clause 4(c) of schedule II of the CGST Act, 2017 where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course of furtherance of his business immediately before he ceases to be a taxable person, unless –
The business is transferred as a going concern to another person; or
The business is carried on by a person representative who is deemed to be a taxable person.
As per Rule 41 (2) the transferor shall also submit a copy of a certificate issued by a practicing charted accountant or cost accountant certifying that the sale, merger, demerger, amalgamation, leases or transfer of business has been done with a specific provisions for the transfer of liabilities.
The input and capital goods so transferred shall be duly accounted for by the transferee in his books of accounts [sec41(4)]
The transfer of business due to death of proprietor is treated as transfer u/s 41(1) of the Act and it will be treated as the business is transferred as a going concern to another person and as per Sec-II of CGST Act, 2017 it will not be covered under supply.
Get the registration of dead person cancelled
In cash of death of sole proprietor, application shall be made by the legal heir/ successor manually before the concerned tax authorities. The new entity in which the applicant proposes to amalgamate itself shall register with the tax authority before submission of the application for cancellation. This application shall be made only after that the new entity is registered. (See instruction for filling of Application for cancellation (REG-16)
As per section 29 (1) the proper officer may, either on his own motion or on an application field by the registered person or by his legal heir, in case of death of such person , cancel the registration, in such, manner and within such period as may be prescribed.
As per Rule 20A registered person seeking cancellation of his registration under sub-section (1) of section 29 shall electronically submit an application in FORM GST REG-16, at the common portal within a period of thirty days of the occurrence of the event warranting the cancellation.
As per Rule 22(3) where a person who has submitted an application for cancellation of his registration is no longer liable to be registered or his registration is liable to be cancelled, the proper officer shall issue an order in FORM GST REG -19 , within a period of thirty days from the date of application submitted under rule 20 or, as the case may be, the date of the reply to the show cause issued under sub-rule (1), cancel the registration, with effect from a date to be determined by him and notify the taxable person, directing him to pay arrears of any tax , interest or penalty including the amount liable to be paid under sub-section (5) of section 29 . The provisions of sub-rule (3) of rule 22 shall, mutatis mutandis, apply to the legal heirs of a deceased proprietor, as if the application had been submitted by the proprietor himself.
As per provisions of 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 to wholly or to the extent of such transfer, to pay the tax, interest or any penalty due from the taxable person up to the time of such transfer, whether such tax, interest or penalty has been determined before such transfer, but has remained or is determined thereafter.
As per section 45 every registered person who is required to finish a return under sub-section (1) of section 39 and whose registration has been cancelled shall furnish a final return in form GST-10 within three months of the date of cancellation or date of order of cancellation, whichever is later, in such form and manner as may be prescribed.[See Rule 81]
Process explained by CBIC in FAQ
In case of death of sole proprietor, Legal heir has to visit officer of the proper officer (jurisdiction Officer) and submit the Death Certificate of the sole proprietor along with a succession Certificate before the proper officer as documentary evidence.
Proper Officer will add legal heir as the authorized signatory on the GST portal.
In case the successor is minor, he cannot be added as an authorized signatory. In such cases, minor successor needs to be represented by his legal/ natural / testamentary (appointed by will) guardian. The legal guardian needs to be appointed or nominated by the competent authority (Normally district Judge )
Legal heir has to apply for new registration.
Once the new registration is approved, Legal heir has to apply for the transfer of ITC by filling FORM GST ITC -02 to new entity. However, there is no restriction on filling cancellation. It is an independent form and has no relation with cancellation of the sole proprietorship firm.
Username and temporary password reset will be communicated to the e- email address of the newly added authorized signatory as entered by the tax Officer in your jurisdiction. Next the newly added authorized signatory need to login to the GST portal available at https://www.gst.gov.on/and login using the first time login link. He/she will be forced to change your username and password after first time login with the Username and Temporary password that was emailed on the newly added e-mail address of the Primary Authorized Signatory.
Legal heir or his/her authorized signatory has to submit the application for cancellation and select the “Death of Proprietor” as reason of Cancellation of Registration and attach sufficient proof.
