Conversion of Proprietorship into Partnership Firm

[ROHIT GOEL]

Dear Sirs,

One of our client intends to convert their existing Proprietorship firm into a partnership concern. Their existing balance sheet consists of Immovable properties, Computers and other office equipments. As per planned process of transfer, entire business will be transferred as such and assets will be contributed as Capital in the said firm at their book values.

As per Clause 4(c) of Schedule-2 of the CGST Act, 2017, in case a business is transferred as a going concern, the transfer of assets would not result in a supply. However, I do not think going concern is defined in the Act. Therefore, do you believe such transfer at book values of all assets would suffice the condition of going concern?

Further, I believe as per section 18(3) of the Act r.w. Form ITC-02, the ITC as of date of transfer could be transferred. Are there any restrictions to the same as to what nature of ITC could not be transferred?

Your guidance will be highly valued.

AI Summary

Converting Proprietorship to Partnership: Is it a 'Going Concern' under CGST Act? Transfer ITC via Form ITC-02 A client plans to convert their proprietorship into a partnership firm, transferring all business assets as capital at book value. They inquire if this qualifies as a 'going concern' under the CGST Act, 2017, which exempts such transfers from being considered a supply. Additionally, they seek clarification on transferring input tax credit (ITC) under section 18(3) of the Act using Form ITC-02. Respondents advise consulting Rule 41 of the CGST Rules, 2017, which outlines procedures for transferring unutilized ITC during business transitions. The responses confirm the client's understanding and suggest relevant case laws for further reference.