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

M/s Rao & Sons, a registered partnership firm with partners Anil, Bhavin and Chetan, has an unpaid GST demand of Rs 3,00,000 (tax, interest and penalty combined). Under the CGST Act, 2017, who is liable to pay this amount?

The firm and each of its partners are jointly and severally liable for the tax, interest and penalty. Section 90 of the CGST Act makes this liability apply notwithstanding any contract to the contrary, so the department can recover the full amount from the firm or any partner.

  1. AOnly the firm, because it is the registered taxable person
  2. BThe firm and each partner, jointly and severallyCorrect
  3. COnly the partners in proportion to their profit-sharing ratio, and not the firm
  4. DOnly the managing partner named in the registration

Explanation

Section 90 provides that, notwithstanding any contract to the contrary, where a firm is liable to pay tax, interest or penalty, the firm and each partner are jointly and severally liable. The liability is therefore not limited to the firm, nor is it split by profit ratio or confined to one partner.

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