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

Mr. Raghunath Iyer, a sole proprietor registered under GST, died on 10 August. A tax demand of ₹4,80,000 for earlier periods remained unpaid. His son, Karthik, continued the same business after his death. Which statement is correct under the CGST Act, 2017?

Karthik is liable to pay the tax, interest and penalty due from his deceased father, because he continued the business after the death. The liability applies whether the demand was determined before or after death. Estate-limited liability applies only if the business is discontinued.

  1. AKarthik is liable to pay the tax, interest or penalty due from Mr. Iyer because he continued the businessCorrect
  2. BKarthik is liable only up to the value of the estate inherited, because the liability of a legal representative is always limited to the estate
  3. CNo one is liable, because the liability of a proprietor ends on his death
  4. DKarthik is liable only if the demand was determined before the death of Mr. Iyer

Explanation

Where a person liable to pay tax dies and the business is continued by the legal representative or any other person, that person is liable to pay the tax, interest or penalty due from the deceased. This applies whether the amount was determined before or after death. The estate-limited liability applies only where the business is discontinued, so option 2 is wrong.

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