TMI BlogLIABILITY TO PAY TAX IN CERTAIN CASES UNDER MODEL GST LAWX X X X Extracts X X X X X X X X Extracts X X X X ..... LIABILITY TO PAY TAX IN CERTAIN CASES UNDER MODEL GST LAW - By: - Mr. M. GOVINDARAJAN - Goods and Services Tax - GST - Dated:- 5-1-2017 - - A taxable person is liable to register under the provisions of GST Act and pay the tax to the credit of either the Central Government or the State Government. Section 10 of the Model Goods and Services Tax Act, 2016 ( Act for short) defines the term taxable person as- A person who is registered or liable to be registered under Schedule V of the Act ; A person who has obtained or is required to obtain more than one registration, whether in one State or more than one State, shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act ; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... An establishment of a person who has obtained or is required to obtain registration in a State, and any of his other establishments in another State shall be treated as establishments of distinct persons for the purposes of this Act . Chapter XXIV of the Act provides for the liability to pay tax in certain cases as detailed below- Liability in case of transfer of business Section 127 ; Liability of agent and principal Section 128 ; Liability in case of amalgamation/merger of companies Section 129 ; Liability in case of company in liquidation Section 130 ; Liability of directors of private company Section 131 ; Liability of partners of firm to pay tax- Section 132 ; Liability of guardians, tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustees etc., - Section 133 ; Liability of court wards etc., - Section 134 ; Special provision regarding liability to pay tax, interest or penalty in certain cases Section 135 ; Liability in other cases Section 136 . Liability in case of transfer of business Transfer of business by means of sales or otherwise is common nowadays. Section 127 provides that where a taxable person transfers his business in whole or in part by- sale; gift; lease; leave and license, hire or in any other manner whatsoever, the taxable person and the person to whom the business is transferred is jointly and severally be liable wholly or to the extent of such transfer to pay the tax, interest or any penalty due f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the taxable person up to the time of such transfer but has remained unpaid or is determined thereafter. The transferee of the said business is liable to pay the tax on the supply of goods and/or services by him with effect from the date of such transfer. He shall, if he is an existing taxable person apply within the prescribed time for amendment of his certificate of registration. Liability of agent and principal This sort of liability has been found in the amended Act and not found in the original model law. Section 128 provides that where an agent supplies or receives any taxable goods on behalf of his principal such agent and his principal shall be jointly and severally liable to pay the tax. Liability in case of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... malgamation/merger of companies The liability of paying tax in case of amalgamation or merger of companies is discussed in Section 129 . Section 129 (1) provides that when two or more companies are amalgamated or merged by the order of- Court; or Tribunal; or Central Government and the order is to take effect from a date earlier to the date of the order and any two or more of such companies have supplied or received any goods and/or services to or from each other during the period commencing on the date from which the order takes effect till the date of the order, then such transactions of supply and receipt shall be included in the turnover of supply or receipt of the respective companies and shall be liable to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly. Section 129(2) clarifies that the said two or more companies shall be treated as distinct companies for the period up to the date of the said order and the registration certificates of the said companies shall be cancelled, where necessary, with effect from the date of such order. Liability in case of company in liquidation If a company goes into liquidation either voluntarily or by Court the existence of the company will cease and the Liquidator will be appointed by the Court to take care of the company until the final dissolution of the company. Section 130 provides for the procedure in such a case for GST purpose as detailed below- Every person appointed as receiver of any assets of a company shall wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin 30 days after his appointment, give intimation of his appointment to the jurisdictional Commissioner; The Commissioner shall, after making such inquiry or calling for such information as he may deem fit, notify the liquidator within 3 months from the date on which he receives intimation of the appointment of the liquidator, the amount which in the opinion of the Commissioner would be sufficient to provide for any tax, interest or penalty which is then, or is likely thereafter to become, payable by the company; When any company is would up and any tax, interest or penalty determined on the company for any period, whether before or in the course or after its liquidation, cannot be recovered, then every person who was a director of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch company shall jointly and severally be liable for the payment of such tax, interest or penalty, unless he proves to the satisfaction of the Commissioner that such non recovery is not attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. Liability of directors of private company Section 131(1) provides that notwithstanding anything contained in the Companies Act, 2013 , where any tax is due from a private company in respect of- any supply of goods or services for any period; or from any other company in respect of any supply of any period during which such other company was a private company cannot be recovered, then, every person who was a directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the private company shall be jointly and severally liable for the payment of such tax unless he proves that the non recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. Section 131(2) provides the liability of a private company which is converted into a public company. Where the tax us due and cannot be recovered from such private company, then Section 131(1) shall not be applicable to any person who was a director of such private company in relation to any t ax due in respect of any supply of such private company. Liability of partners of firm Partnership firm is not a judicial person. It is having unlimited liability on the partners. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The same is applicable to GST also. Section 132 provides that notwithstanding any contract to the contrary, where any firm is liable to pay any tax, interest or penalty, the firm and each of the partners of the firm shall jointly and severally be liable for such payment. This section further makes an obligation on the part of the retiring partner. The retiring partner or the firm shall intimate the date of the retirement of the said partner to the jurisdictional Commissioner by a notice in that behalf in writing within one month from the date of retirement. Such partner shall be liable to pay tax, interest or penalty due up to the date of his retirement, whether determined or not on that date. If no such intimation is given wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin one month from the date of retirement the liability of such partner shall continue until the date of on which such intimation is received by the Commissioner. Liability of guardians, trustees etc., Section 133 provides that where the business in respect of which any tax, interest or penalty is payable is carried on by any guardian, trustee or agent of a minor or other incapacitated person on behalf of them, the tax, interest or penalty shall be levied upon and recovered from such guardian, trustee or agent, as if such person were a major or a capacitated person and as if he were conducting the business himself. Liability of Court of Wards etc., Section 134 provides that where the estate or any portion of the estate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a taxable person owing a business for which any tax, interest or penalty is payable is under the control of the Court of Wards, the Administrator General, the Official Trustee or any receiver or manager appointed by or under any order of a court, the same shall be levied upon and recoverable from such Court of Wards etc., Liability in case of death of taxable person Section 135 provides the recovery of tax from the person who survives a death person. Section 135 (1) provides that where a taxable person dies then- if the business is continued after his death by his legal representatives or any other person, they shall be liable to pay the dues to the Government; if the business is discontinued, whether before or aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er his death, his legal representative shall be liable to pay out of the estate of the deceased, to the extent to which the estate is capable ofmeeting the charge, the tax, penalty or interest due from such person; whether such tax, interest or penalty has been determined before his death but has remain unpaid or is determined after his death. Liability in case of HUF Section 135 (2) provides that where a taxable person is a HUF or an Association of person and the property of HUF or the association of person is partitioned amongst the various members then each member of the member or group of members shall or group of members shall jointly and severally be liable to pay the tax, interest or penalty due from the taxable perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n up to the time of partition whether such tax, penalty or interest has been determined before partition but has remained unpaid or is determined after the partition. Liability on dissolution of firm Section 135 (3) provides that where a taxable person is a firm and the firm is dissolved, then every person, who was a partner shall be jointly and severally liable to pay the tax, interest or penalty from the firm up to the time of dissolution whether such tax, interest or penalty has been determined before the dissolution but has remain unpaid or is determined after its dissolution. Liability on termination of guardianship or trustee Section 135(4) provides that where a taxable person is liable to pay tax, interest or pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty is the guardian or a ward or a trustee and if the guardianship or trustee is terminated, the ward or the beneficiary shall be liable to pay the dues whether such dues has been determined before the termination of guardianship or trust but has remained unpaid or is determined thereafter. Liability on discontinuance of HUF/Firm/AOP Section 136 (1) provides that where a taxable person is a firm or AOP or a HUF and the same has discontinued its business then the tax payable may be determined as if no such discontinuance had taken place. Every person who was at the time of such continuance, a partner of such firm or a member of AOP or HUF shall be liable jointly and severally for the payment whether the same has been determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior to or after such discontinuance. Liability on change in constitution of HUF/AOP Section 136 (2) provides that where a change has occurred in the constitution of a firm or an association of person, the partners before such change and after the change shall jointly and severally be liable to pay the dues from such firm or AOP for any period before its reconstitution. Liability of LLP The explanation to Section 136 provides that a LLP formed and registered under the LLP Act, 2012 shall also be considered as a firm and the provisions applicable to the firm will also be applicable to the LLP and its members. - Reply By Ganeshan Kalyani as = Informative article. Dated: 5-1-2017 - Scholarly articles for knowledge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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