As we discussed in the last blog about certain GST provisions to be fulfilled under demerger of a company, here in continuation of the last blog we discuss some more GST provisions which need to be catered to comply with GST LAW: –
- Annual Return and Final Return
As per Section 44 of the CGST Act, every registered person, other than an Input Service Distributor, a person is called a casual taxable person if he is paying tax under section 51 or 52, and a non-taxable person will furnish an annual return that may cover a self-certified reconciliation statement, that reconciles the value of supplies stated in the return furnished for the financial year, with the audited annual financial statement for every financial year electronically.
However, the question which might arise is that whether the GST portal allows the filing of Annual Return by the transferor entity post applying for cancellation? To comply with the provisions of law, the GST common portal should allow for the filing of such returns. In this regard, it is advisable to check the restrictions on the GSTN portal and seek proper clarification from the department.
Also, as per Section 45 read with rule 81 of CGST Rules 2017, every registered person who is required to furnish a return under Section 39 and whose registration has been cancelled shall furnish such return in FORM GSTR-10 through the common portal.
- Treatment of ongoing investigations or legal proceedings
Under a Business Transfer Agreement, the transferor and the transferee will remain separate persons even after transferring the business. Hence, all the proceedings related to the GST law for the periods before the transfer will be taken against the transferor of business. The CGST Act already creates a joint and several liabilities of the transferor and the transferee in respect of demands of tax, interest, and penalty for the periods up to the date of transfer.
However, the involvement is different in the case of transfer within a scheme of merger, de-merger, or amalgamation. Their schemes usually provide that all liabilities, suits, claims of whatever nature outstanding on behalf of the transferee company and this company will be responsible for the same.
On that account, in respect to this, merger, de-merger, amalgamation by an order of the Court, all actions related to the periods before the date of the merger, de-merger, the amalgamation will have to be instituted in the name and against of the transferee, i.e., the merged, amalgamated, or resultant company.
CONCLUSION
Although the GST laws have made some provisions concerning the transfer of business, there are various areas of debates, potential disputes, and resultant litigation. These problems need to be addressed by the GST Council to make sure that business restructuring continues to empower the business in achieving the desired benefits and does not result in an excessive burden of GST on the businesses.
In light of the above discussions, it is clear that a person restructuring his business model may be required to analyse its impact keeping in mind various implications under GST in different scenarios, which will ensure smooth management of the business and avoid future inquiries by authority of the tax.
This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.
Posted by:
CA Tarun Kapoor
AKGVG & Associates