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

A partnership firm discontinued its business on 31 March. In December, GST demand of Rs 5,00,000 relating to periods up to 31 March was determined against the firm. Which statement follows from Section 94 of the CGST Act, 2017?

The demand remains valid. Section 94 allows tax up to the discontinuance date to be determined as if no discontinuance had occurred, and every person who was a partner at the time of discontinuance is jointly and severally liable, whether determination happens before or after discontinuance.

  1. AThe demand lapses because the business has been discontinued
  2. BOnly partners who were in the firm at the time of registration are liable
  3. CThe demand may be determined as if there were no discontinuance, and every person who was a partner at the time of discontinuance is jointly and severally liableCorrect
  4. DPartners are liable only for tax determined before the discontinuance, not afterwards

Explanation

Section 94(1)(a) lets tax, interest and penalty up to the date of discontinuance be determined as if no discontinuance occurred. Section 94(1)(b) makes every person who was a partner at the time of discontinuance jointly and severally liable, whether the amount was determined before or after discontinuance. So determination in December is valid.

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