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

Mehta & Sons, a partnership firm registered under GST, was dissolved on 31 March. Partners were Mr. Mehta, Mr. Shah and Mr. Patel. In August, tax of ₹6,00,000 for periods up to 31 March was determined against the firm. Which statement is correct under the CGST Act?

Every person who was a partner at dissolution is jointly and severally liable for the tax due from the firm up to the time of dissolution. It makes no difference that the amount was determined after dissolution, and liability is not restricted to each partner's proportionate share.

  1. AOnly the partner who managed the firm's GST compliance is liable
  2. BEvery person who was a partner is jointly and severally liable for the tax due up to the time of dissolution, even though it was determined after dissolutionCorrect
  3. CThe liability lapses because the firm has ceased to exist
  4. DEach partner is liable only for a one-third share and cannot be pursued for the rest

Explanation

On dissolution of a firm, every person who was a partner is jointly and severally liable for tax, interest or penalty due up to the time of dissolution, whether determined before or after dissolution. Liability is not limited to a proportionate share, so the one-third option is wrong.

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