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CMA Intermediate · Direct and Indirect Taxation · Computation of GST Liability

A firm had partners P and Q. Partner R was admitted, so the firm was reconstituted. A GST demand of Rs 2,40,000 relates to a period before the reconstitution. Under the CGST Act, 2017, who is jointly and severally liable for it, without prejudice to Section 90?

P, Q and R are all jointly and severally liable. Section 94(2) makes partners of the firm as it existed before and as it exists after reconstitution liable for dues relating to any period before the reconstitution, without prejudice to Section 90.

  1. AOnly P and Q, the partners before reconstitution
  2. BOnly R, the incoming partner, as the current manager
  3. COnly the firm, since reconstitution creates a new person
  4. DThe partners as the firm existed before and as it exists after reconstitution, namely P, Q and RCorrect

Explanation

Section 94(2) states that where the constitution of a firm changes, the partners as it existed before and as it exists after reconstitution are jointly and severally liable for dues for any period before reconstitution. This covers P, Q and the new partner R. Limiting liability to the old partners ignores the 'as it exists after' wording.

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