Section 93 - Special provisions regarding liability to pay tax, interest or penalty in certain cases

Practical example

After a proprietor’s death, heirs continue the business and obtain succession/registration changes while paying outstanding dues.

Professional alert

Succession planning should include GST registrations, credits, stock and pending disputes.

SECTION 94 Liability in other cases BARE ACT - OPERATIVE TEXT 94. Liability in other cases.-(1) Where a taxable person is a firm or an association of persons or a Hindu Undivided Family and such firm, association or family has discontinued business-

(a) the tax, interest or penalty payable under this Act by such firm, association or family up to the date of such discontinuance may be determined as if no such discontinuance had taken place; and

(b) every person who, at the time of such discontinuance, was a partner of such firm, or a member of such association or family, shall, notwithstanding such discontinuance, jointly and severally, be liable for the payment of tax and interest determined and penalty imposed and payable by such firm, association or family, whether such tax and interest has been determined or penalty imposed prior to or after such discontinuance and subject as aforesaid, the provisions of this Act shall, so far as may be, apply as if every such person or partner or member were himself a taxable person.

(2) Where a change has occurred in the constitution of a firm or an association of persons, the partners of the firm or members of association, as it existed before and as it exists after the reconstitution, shall, without prejudice to the provisions of section 90, jointly and severally, be liable to pay tax, interest or penalty due from such firm or association for any period before its reconstitution.

(3) The provisions of sub-section

(1) shall, so far as may be, apply where the taxable person, being a firm or association of persons is dissolved or where the taxable person, being a Hindu Undivided Family, has effected partition with respect to the business carried on by it and accordingly references in that sub-section to discontinuance shall be construed as reference to dissolution or to partition.

Explanation.-For the purposes of this Chapter,-

(i) a “Limited Liability Partnership” formed and registered under the provisions of the Limited Liability Partnership Act, 2008 (6 of 2009) shall also be considered as a firm;

(ii) “court” means the District Court, High Court or Supreme Court. DECODED IN SIMPLE LANGUAGE Addresses liability where firm/AOP constitution changes, firm dissolves, or guardian/trustee arrangements terminate. Pre-change and post-change persons can be jointly/severally liable as specified. PRACTICAL EXAMPLE A partnership reconstitutes after a partner change; dues attributable to the earlier period remain recoverable under section 94. SENIOR PROFESSIONAL ALERT Entity-law reconstitution does not reset GST history.

CGST Rules - rule by rule The rule text layer is paired with a current amendment/control note. Forms and portal labels may change; use the latest official utility. Rule 41 RULE TEXT / CONSOLIDATED BASE LAYER 41. Transfer of credit on sale, merger, amalgamation, lease or transfer of a business.- (1) A registered person shall, in the event of sale, merger, de-merger, amalgamation, lease or transfer or change in the ownership of business for any reason, furnish the details of sale, merger, de-merger, 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. Explanation:- For the purpose of this sub-rule, it is hereby clarified that the “value of assets” means the value of the entire assets of the business, whether or not input tax credit has been availed thereon.72 72 Inserted vide Notf no. 16/2019-CT dt. 29.03.2019 (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, de-merger, 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 un-utilized 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. Rule 41A. Transfer of credit on obtaining separate registration for multiple places of business within a State or Union territory.- (1) A registered person who has obtained separate registration for multiple places of business in accordance with the provisions of rule 11 and who intends to transfer, either wholly or partly, the unutilised input tax credit lying in his electronic credit ledger to any or all of the newly registered place of business, shall furnish within a period of thirty days from obtaining such separate registrations, the details in FORM GST ITC-02A electronically on the common portal, either directly or through a Facilitation Centre notified in this behalf by the Commissioner: Provided that the input tax credit shall be transferred to the newly registered entities in the ratio of the value of assets held by them at the time of registration. Explanation.- For the purposes of this sub-rule, it is hereby clarified that the ‗value of assets‘ means the value of the entire assets of the business whether or not input tax credit has been availed thereon. (2) The newly registered person (transferee) shall, on the common portal, accept the details so furnished by the registered person (transferor) and, upon such acceptance, the unutilised input tax credit specified in FORM GST ITC-02A shall be credited to his electronic credit ledger.73 CURRENT OPERATIVE CONTROL AT 29 JUNE 2026 ITC-02 transfers unutilised credit on sale, merger, demerger, amalgamation, lease or transfer with specific provision for liabilities and CA/CMA certificate; demerger allocation follows asset-value ratio.

Rule 160 RULE TEXT / CONSOLIDATED BASE LAYER 160. Recovery from company in liquidation.- Where the company is under liquidation as specified in section 88, the Commissioner shall notify the liquidator for the recovery of any amount representing tax, interest, penalty or any other amount due under the Act in FORM GST DRC -24. CURRENT OPERATIVE CONTROL AT 29 JUNE 2026 Commissioner notifies liquidator for recovery in DRC-24 and communicates amount under section 88.

Notifications, circulars and implementation controls Instrument Date/status Why it matters CGST Act consolidation As on 11 June 2026 Sections 85-94 liability architecture. Rule 41 and FORM GST ITC-02 Active rule Credit transfer and liability provision on business reorganisation. Rule 160 and FORM GST DRC-24 Active rule Recovery communication in liquidation. Insolvency and Bankruptcy Code, 2016 Current special-law overlay Sections 82/88 must be read with moratorium, claims and waterfall. Companies Act / LLP Act / Partnership Act Entity-law overlay Determines legal event and documents but does not displace GST liability provisions. Reading rule: A circular guides administration but cannot override the Act, Rules or Gazette. Always read the principal instrument with amendments and effective-date clauses.

CA / finance / professional case studies Case 1: Going-concern acquisition Facts: Buyer acquires a business with historic GST dispute. Question: Can tax authority recover from buyer? Analysis: Section 85 can impose joint and several liability for pre-transfer dues; quantify risk and negotiate security/indemnity. References: s.85 Case 2: Retiring partner Facts: Retirement is recorded in deed but not intimated to Commissioner. Question: What risk remains? Analysis: Liability can continue until intimation is received; submit immediately and preserve proof. References: s.90 Case 3: Private-company director Facts: Company has no assets and department proceeds personally. Question: What defence exists? Analysis: Director must prove non-recovery is not attributable to gross neglect, misfeasance or breach of duty. References: s.89

Case 4: Merger appointed date Facts: Court order is retrospective. Question: Are gap-period inter-company invoices ignored? Analysis: No. Section 87 treats companies as distinct until order date for GST. References: s.87 Case 5: Liquidator distribution Facts: Assets are proposed to be distributed before tax estimate. Question: What control is needed? Analysis: Liquidator must notify Commissioner and reserve for communicated liability before distribution. References: s.88; r.160 Case 6: Principal-agent stock Facts: Agent sells goods in own invoice for principal. Question: Who is liable? Analysis: Principal and agent may be jointly and severally liable under section 86, subject to actual arrangement. References: s.86 Case 7: Death of proprietor Facts: Heirs discontinue business. Question: Extent of liability? Analysis: Legal representative is liable from estate to prescribed extent; if business continues, ongoing obligations apply. References: s.93

Case 8: Demerger credit transfer Facts: Business division is demerged. Question: How is ITC transferred? Analysis: Rule 41/ITC-02 and asset-value ratio apply with liabilities and certification conditions. References: r.41; s.18(3)

Finin2min Q&A 1. Can buyer inherit seller GST dues?