Treatment of old transaction in case of death of proprietor

[Khushi Kansal]

“In case of the death of a sole proprietor, what is the treatment of old transactions where services were already rendered but the invoice was not raised and payment was also not received? How should the legal heir handle such a situation, and if the legal heir generates the invoice, should it be done under the deceased person’s GST number or under a new GST registration?”

 

[Sadanand Bulbule]

Plz refer CBIC Circular No. 96/15/2019-GST dated 28/03/2019, which clarifies how to handle transfer of business due to death of the registered person.

So old GSTIN must be cancelled and legal heir must obtain new GSTIN. 

[KASTURI SETHI]

As per FAQ dated 15.12.2018 (3rd Edition) Q.No.53 old registration has to be got cancelled and legal heir will apply for new GST registration. Treat the old transaction afresh. 

[Khushi Kansal]

For Example : A sole proprietor passed away on 1st October. Before his death, he had an ongoing contract and had already provided services to the client. The payment for such services has been received, but the invoice was not issued during his lifetime. As per GST provisions, an invoice can be generated within one month from the date of supply of service.

Query:

1. In this case, can the legal heir issue an invoice dated 2nd October (after the date of death) using the deceased proprietor’s GSTIN, in order to close the transaction for services already rendered before death?

2. If yes, will such an invoice be considered valid under GST since it is issued within the prescribed time limit of one month?

3. Kindly clarify the correct compliance procedure in such cases for proper accounting and tax reporting

I request your guidance on the above situation for proper compliance under the GST law.

[Shilpi Jain]

If the legal heir is continuing the business he can issue the invoice from the new registration that he is taking.

Additionally, in case you do not want to delay issue of invoice, you can also consider issuing it before 1st Oct since law allows even issuing an early invoice.

[Khushi Kansal]

In case of the death of a sole proprietor, if invoices are issued using the deceased proprietor’s GSTIN after the date of death, what legal implications, issues, or repercussions may arise under the GST law?

[Sadanand Bulbule]

In case of the death of a sole proprietor, in terms of Section 29 of the CGST Act, GSTIN stands cancelled on his death. Therefore you are not permitted to use that GSTIN to issue invoices to pre-death transactions.

You may consult the jurisdictional GST office for more guidance.

AI Summary

Sole proprietor death: legal heir must obtain new GST registration and avoid using the deceased GSTIN when invoicing.
On a sole proprietor's death the existing GSTIN is treated as cancelled and the legal heir must obtain a new GST registration; invoices issued after death must not use the deceased proprietor's GSTIN. Pre death supplies with no invoice should be addressed by the successor under the new GSTIN consistent with the one month invoice timing rule, or, where permitted, by issuing invoices dated before death to avoid use of the cancelled GSTIN. Consult the jurisdictional GST office for local guidance.