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

Mr. Raghav Iyer, a registered sole proprietor trading in hardware, died on 10 July. His son Karthik continued the same business from 15 July under the existing premises. A demand of tax and interest for earlier periods, pertaining to Raghav's supplies, was determined on 20 August. Who is liable to pay the dues under the CGST Act?

Karthik is liable, because when a business is continued after the proprietor's death, the legal representative or other person continuing it must pay the tax, interest or penalty due from the deceased, whether determined before or after the death.

  1. AKarthik, as the person continuing the business, is liable to pay the tax and interest due from RaghavCorrect
  2. BNo one, because the liability of a proprietor ends on his death
  3. CKarthik is liable only up to the value of the estate inherited, even though the business is continued
  4. DThe department must wait until the business is discontinued before recovering the dues

Explanation

Where a person liable to pay tax dies and the business is continued by a legal representative or any other person, that person is liable for the tax, interest or penalty due from the deceased. This holds whether the amount was determined before or after death. The estate-limited liability applies only where the business is discontinued, so the third option is wrong.

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