Cancelling GST Registration for a Sole Proprietor after Death

As a business owner, it is important to understand the process of cancelling a GST registration in the event of the death of a sole proprietor. The GST (Goods and Services Tax) registration is a mandatory requirement for businesses with a turnover exceeding a certain limit. In the case of the death of a sole proprietor, the GST registration must be cancelled to ensure compliance with the government's laws and regulations.

Understanding the GST Registration Cancellation Process

The process of cancelling a GST registration for a sole proprietor after death involves several steps. The first step is to inform the GST department of the death of the sole proprietor. This can be done by submitting a written application to the GST department and a copy of the death certificate.

Once the GST department receives the application, they will cancel the GST registration of the business. The cancellation process usually takes around 15-20 days, depending on the GST department's workload.

Documents Required for GST Registration Cancellation

To cancel the GST registration of a business after the death of a sole proprietor, the following documents are required:

• A written application for cancellation of GST registration

• A copy of the death certificate of the sole proprietor

• GST registration certificate

• PAN (Permanent Account Number) of the business

• Cancelled cheque or bank account details for refund of GST credit, if any.

A Successor's Registration

According to Section 22 of the CGST Act of 2017, the successor to a sole proprietor who passes away must register their firm with the government as of the date of succession. The registration procedure is completed by submitting Form GST REG-01 online, which is quite similar to the usual procedure. You can find the entire procedure here. However, "death of the proprietor" should be stated as the cause for obtaining registration at the time of filing.

Transfer of Tax Liability and Input Tax Credit

The transfer of ITC is permitted by Section 18(3) of the CGST Act, 2017, so long as the firm's liabilities are transferred in accordance with Rule 41. The transferor and the transferee are equally and severally liable under Section 85(1) for any unpaid tax, interest, and penalties. Furthermore, according to section 93(1), the person who carries on the deceased person's business is responsible for paying any unpaid tax, interest, or penalty liabilities.

Following a comprehensive reading of the above sections, the following can be summarised:

Let's say the successor wants to continue the lone proprietor's business and uses the input tax credit recorded in the sole proprietor's electronic credit ledger. In that situation, he would also be responsible for covering the proprietor's outstanding tax debt.

How to Transfer an ITC to a Successor?

As previously stated, the procedure for transferring ITC should follow Rule 41 of the CGST Rules. The sole proprietor's death certificate and the succession certificate must first be provided as documentary evidence to the jurisdictional GST officer by the successor or legal heir. The competent officer will add the successor as the sole proprietor's authorised signatory. The successor's legal guardian will be the designated signatory if the successor is a minor.

The GST site will send a temporary username and password to the newly added authorised signatory's email address. The successor can now access the sole proprietor's account using this temporary login information and the first-time login link. He will be prompted to update his login and password. After successfully logging in, he must submit Form GST ITC-02 with the same registration, i.e., the sole proprietor's registration. After providing the necessary information, the form must be submitted.

The successor must confirm the transfer of ITC using his registration to complete the transfer. He can now cancel the sole proprietor's registration after completing the transfer.

Cancellation of GST registration upon sole proprietor's passing

Certain conditions are listed in Section 29(1) of the CGST Act, 2017, under which the taxpayer may request the cancellation of registration. The demise of the sole proprietor is one such scenario. The cancellation request may be made using Form GST REG-16. You may find the full cancellation procedure here. Ensure that "death of sole proprietor" is listed as the cancellation reason. Additionally, the transferor's and the transferee's GSTINs must be specified.

Conclusion

Cancelling the GST registration of a business after the death of a sole proprietor is necessary to ensure compliance with the government's laws and regulations. The process of cancellation involves several steps, including informing the GST department of the death, submitting the required documents and obtaining a refund of GST credit, if any.