GST Cancellation or Transfer After Proprietor Death - Process, Fees

When a sole proprietor (a person who owns and runs a business alone) passes away, their family or legal representatives need to manage the Goods and Services Tax (GST) registration linked to the business. They have two main choices: canceling the GST registration or transferring it to a successor who will continue the business. Each option requires specific steps and documents to follow the law properly. Handling these tasks can be complex, so seeking help from experts like Professional Utilities can make the process easier and ensure everything is done correctly. We specialize in services such as GST registration and filing, making them a valuable resource during this challenging time.

Table of Content

Available Options in Case of Death of Sole Proprietor
Documents Required for Cancellation of GST Registration or Transfer of Business after Proprietor’s Death
Process for Cancellation of GST or Transfer of Business after Proprietor’s Death
Transfer of Input Tax Credit and Tax Liabilities after Sole Proprietor Death
Conclusion
Frequently Asked Questions

Available Options in Case of Death of Sole Proprietor

When a sole proprietor registered under GST passes away, the legal heirs or representatives have two possible options:

GST registration Cancellation: If the sole proprietor dies, the representatives or legal heirs must apply to cancel the GST registration by submitting Form GST REG-16 on the GST Portal.

Business Transfer: The representatives or legal heirs are eligible to apply for transfer of GST registration in the event of the death of a sole proprietor by filing an application to the office of the Proper (Jurisdiction) Officer for becoming an authorized signatory.

Documents Required for Cancellation of GST Registration or Transfer of Business after Proprietor’s Death

When a sole proprietor passes away, legal heirs or representatives manage the Goods and Services Tax (GST) registration linked with the business. Depending on whether they choose to cancel the GST registration or transfer the business, specific documentation is required to ensure compliance with GST regulations.

For Cancellation of GST

Death certificate of the proprietor.
Succession certificate or legal heir certificate
Identity proofs of both the deceased and the legal heir
No Objection Certificate (NOC) from other legal heirs, if applicable

For Transfer of Business

Death certificate of the proprietor.
Succession certificate or legal heir certificate
Identity proofs of both the deceased and the legal heir
No Objection Certificate (NOC) from other legal heirs, if applicable
New GST registration certificate.
Form GST ITC-02 for ITC transfer.

Process for Cancellation of GST Registration or Transfer of Business after Proprietor’s Death

When a sole proprietor passes away, it's important to handle, the Goods and Services Tax (GST) registration associated with their business. The legal heirs or successors have two primary options: canceling the GST registration or transferring the business.

Canceling the GST Registration
Transferring the Business

If the decision is to discontinue the business, the GST registration must be canceled. Follow these steps:

Notify the GST Authorities:
- The legal heir should inform the jurisdictional GST officer about the proprietor's death.
- Submit necessary documents, including the death certificate and succession certificate.
Apply for Cancellation:
- File Form GST REG-16 electronically on the GST portal.
- Specify "Death of Sole Proprietor" as the reason for cancellation.
Settle Outstanding Dues:
- Ensure all pending returns are filed up to the date of cancellation.
- Pay any outstanding taxes, interest, or penalties to avoid future liabilities.

If the legal heir or successor chooses to continue the business, obtaining a new Goods and Services Tax (GST) registration is essential. The following steps should be taken:to transfer the business:

Obtain New GST Registration:
- Apply for a fresh GST registration by filing Form GST REG-01.
- Indicate "Death of Proprietor" as the reason for registration and provide the date of the proprietor's death.
- Upload the death certificate during the application process.
Transfer Input Tax Credit (ITC):
- Before canceling the deceased proprietor's GST registration, file Form GST ITC-02 to transfer any unutilized ITC to the new entity.
- This ensures the successor can benefit from the available credit.
Address Outstanding Liabilities
- Be aware that any pending tax liabilities of the deceased transfer to the successor.
- Both parties are jointly responsible for settling these dues.

Transfer of Input Tax Credit and Tax Liabilities after Sole Proprietor Death

When a sole proprietor dies, and their business is taken over by a legal heir or successor, certain tax responsibilities and benefits can be transferred to the new owner.

Transferring Input Tax Credit (ITC):
- ITC is the credit a business gets for the taxes paid on purchases, which can be used to reduce the tax payable on sales.
- According to Section 18(3) of the Central Goods and Services Tax (CGST) Act, 2017, if a business is transferred due to the owner's death, the remaining ITC can be transferred to the successor.
- To do this, the successor needs to file Form GST ITC-02 on the GST portal before applying to cancel the proprietor's GST registration. This form requests the transfer of the unused ITC to the successor's electronic credit ledger.
Handling Tax Liabilities:
- Section 93(1) of the CGST Act states that if a person who owes tax, interest, or penalties dies, the person who continues the business becomes responsible for these dues.
- This means the successor must pay any outstanding taxes or penalties that the proprietor owed.

Conclusion

Taking care of GST registration after the death of a sole proprietor is a crucial responsibility for the family or legal representatives. Whether deciding to cancel the registration or transfer it to a successor, following the correct procedures and gathering the necessary documents is essential to comply with the law. Getting assistance from professionals like Professional Utilities can simplify the process, reduce stress, and help ensure that all legal requirements are met efficiently.

FAQs Related to GST After Death of Proprietor

What will be done with GST when the owner passes away?

If the business is continued by the legal heir/representative then the heir/representative is liable for all GST dues. If the business is discontinued after the death, the legal heir is responsible for paying the remaining GST liabilities.

How to add a legal heir in GST after the death of a sole proprietor?

The legal heir must visit the GST department with the death certificate and succession certificate. The GST officer will add the legal heir as the authorized signatory. If the successor is a minor, they cannot be made an authorized signatory.

What happens to a proprietorship business in case of proprietor death?

After the owner’s death, the proprietorship may be closed or transferred to legal heirs. The process includes obtaining legal certificates, transferring assets & liabilities, and applying for transfer of ITC.

How to transfer GST registration to a third person after death?

The legal heir must apply for a new registration. After approval, they should file FORM GST ITC-02 to transfer ITC to the new entity. ITC-02 can be filed before or after cancellation.

How to cancel GST registration after death of sole proprietor?

Cancellation can be done using Form GST REG-16 by selecting “death of sole proprietor” as the reason. Both transferor and transferee GSTINs must be mentioned.

How to transfer proprietorship from father to son in GST after death?

The son must submit the death certificate, succession certificate, and required documents to the GST officer. The transfer will be completed as per the GST transfer of business rules.

Is GST canceled in case of death of proprietor?

Yes. Legal heirs can apply for cancellation by filing Form GST REG-16 after the proprietor’s death.

What is suo moto cancellation of GST registration?

Suo moto cancellation happens when a GST officer cancels a registration due to non-compliance. The taxpayer can apply for Restoration of Suo Moto Cancellation of Registration Possible under GST by completing the necessary formalities.