treatment of liability in case of transfer of business

[Rajat Gupta]

A taxpayer has filed an appeal against the demand order which is pending for hearing. He has sufficient balance in the credit ledger to meet any tax demand that may arise in appellate proceedings. However, due to some reasons, he has to transfer his business to another person as going concern and wants to file ITC-02 for transfer of ITC. My query is if the liability arises in future, which GSTN will furnish the same? can the ITC of transferee GSTN be utilized for discharging the tax liability?

 

AI Summary

Transferor liability for pre-transfer tax persists; transferee receives ITC and contractual allocation may not bind tax authorities.
Liabilities for periods before a transfer of business as a going concern ordinarily remain the transferor's responsibility; unutilised ITC transferred via ITC-02 becomes the transferee's credit and cannot be used by the transferor to discharge pre-transfer tax, though a provision contemplates joint and several liability of transferor and transferee. Parties may contractually allocate future liability to the transferee, but such clauses do not negate statutory liability and should be disclosed to the tax authority.