GST on Partition of HUF

[Krishna Murthy]

Dear Experts,

A business in trading of Gold Ornaments was being run by HUF. On demise of Karta, the remaining members of the family decided to divide the assets along with Stock in Trade. A Partition Deed is entered among them to this effect. Since, the assets include Stock in Trade ie Gold Ornaments, the same would also be divided among members and each member gets some portion of Gold Ornaments. What is the GST effect on the transfer of such Stock in Trade.

I am of the view that partition of HUF does not fall within the ambit of Supply u/s 7 of GST Act. Though there is transfer of Stock in Trade, there is no consideration paid and such transfer is not in the course of FURTHERANCE OF BUSINESS. There cannot be any business between entity and its members. They have just taken the right available to them in such HUF, which is obtained by them by birth.

But the assessing officer is of the view that though there is no consideration, it is a Schedule I transaction. I am of the view that a transaction should fall within the scope of Supply, only then the same can be referred to Schedule I. Without being a Supply, one cannot resort to Schedule I to decide the transaction. Since, the present case is out of purview of Supply u/s 7, no GST applicable on transfer of assets on Partition of HUF. Any views on this matter please.

One may also argue that the present case would fall with in the ambit of Clause 1 of Schedule I of CGST Act ie Permanent disposal of business assets on which ITC has been availed. In the present case there was no ITC claimed because the Stock in Trade pertains to pre GST era.

 

AI Summary

Supply between related persons: partition transfers of HUF stock-in-trade may not attract GST absent furtherance of business.
Whether transfer of stock-in-trade on partition of a Hindu Undivided Family is a taxable supply under GST turns on two questions: (i) whether the distribution to members without consideration constitutes a supply, including whether Schedule I's related-person entry applies, and (ii) whether Schedule II para 4(c) - deeming goods part of business assets to be supplied when a taxable person ceases to be such - brings the transfer into the course or furtherance of business unless saved by a going-concern transfer or personal representative rule.