Can a Legal Heir Transfer ITC to a New Entity After the Sole Proprietor’s Death?
Yes, a legal heir can transfer unutilized Input Tax Credit (ITC) to a new entity in case of the sole proprietor’s death. The Central Goods and Services Tax (CGST) Act, 2017 governs this process, ensuring business continuity while adhering to GST laws.
Steps to Transfer ITC After Sole Proprietor’s Death
1. Obtain Legal Documentation
The legal heir must secure:
- The death certificate of the deceased proprietor.
- A succession certificate to establish their legal right to the business’s assets and liabilities.
2. Apply for a New GST Registration
The successor needs to apply for a new GSTIN by filing Form GST REG-01. While submitting this form, select “Death of Proprietor” as the reason for registration to link it with the previous GSTIN.
3. File for ITC Transfer
Using Form GST ITC-02, the successor must initiate the transfer of unutilized ITC to the new GSTIN. This form is submitted via the GST portal.
4. Accept ITC Transfer
The ITC transfer must be accepted in the new GSTIN account to complete the process.
5. Cancel Previous GST Registration
Once the ITC is transferred, the legal heir must cancel the deceased proprietor’s GST registration by filing Form GST REG-16, citing “Death of Sole Proprietor” as the reason.
Key Points to Note
- The legal heir assumes responsibility for any pending tax liabilities of the deceased proprietor.
- Settlement of all dues is crucial to avoid complications during the ITC transfer.
- Refer to Circular No. 96/15/2019-GST issued by CBIC for detailed procedural guidance.
Simplified Guide for Legal Heir ITC Transfer
| Step No. | Key Action | Explanation |
|---|---|---|
| 1 | Obtain Legal Docs | Get death and succession certificates to prove legal heirship. |
| 2 | Apply for GST Registration | Apply for a new GSTIN, citing “Death of Proprietor” as the reason. |
| 3 | Transfer ITC | File Form GST ITC-02 to transfer unutilized ITC. |
| 4 | Accept ITC Transfer | Accept the ITC in the new GST account. |
| 5 | Cancel Old GST Registration | File Form GST REG-16 to cancel the deceased proprietor’s GST registration. |
Common Questions
1. Who is responsible for pending tax liabilities?
The legal heir must settle all outstanding tax dues before initiating the ITC transfer.
2. What happens if documentation is incomplete?
Without proper documents, such as the succession certificate, the process cannot proceed smoothly.
3. Can ITC be transferred to multiple entities?
No, ITC can only be transferred to a single new GSTIN linked to the legal heir or successor.
Additional Insights
- Timely completion of the process ensures business continuity.
- Legal heirs must follow the steps meticulously to avoid compliance issues.
For detailed instructions, refer to Circular No. 96/15/2019-GST issued by CBIC.
Takeaway:
Ensure all legal documents are in place, follow the steps outlined above, and consult professional assistance if needed to ensure a seamless transfer of ITC to the new entity.