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CA Final · Indirect Tax Laws · Liability to Pay in Certain Cases

Gupta Traders, a firm with partners Hari and Indu, owed GST for the period before 1 April. On 1 April Indu retired and Jatin was admitted as a new partner, with no discontinuance of business. In August, tax of Rs 6,00,000 was determined for a period before 1 April. Which statement is correct?

Hari, Indu and Jatin are all jointly and severally liable. When a firm's constitution changes, the partners before and after reconstitution are liable for dues of any period before the reconstitution, so neither the retiring partner nor the new partner escapes.

  1. AOnly Hari, as the continuing partner, is liable for the amount
  2. BHari, Indu and Jatin are all jointly and severally liable, because the partners before and after reconstitution are liable for the period before reconstitutionCorrect
  3. CHari and Jatin alone are liable, as Indu has retired
  4. DOnly Hari and Indu are liable, as Jatin was not a partner in that period

Explanation

On a change in the constitution of a firm, the partners as they existed before and as they exist after reconstitution are jointly and severally liable for tax, interest or penalty for any period before the reconstitution. Therefore Hari, Indu and Jatin are all liable. Excluding Indu or Jatin ignores that both the old and new sets of partners are covered.

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