Skip to content

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

M/s Sundaram Traders, a partnership firm with partners Anil, Bhaskar and Chitra, was dissolved on 31 March. A tax demand for supplies made up to 31 March was determined in the following September and remains unpaid. Which statement is correct under the CGST Act?

All three partners are jointly and severally liable. On dissolution of a firm, every person who was a partner must pay the tax, interest or penalty due up to the time of dissolution, even if it is determined afterwards.

  1. AOnly Anil, as the managing partner, is liable for the demand
  2. BAnil, Bhaskar and Chitra are jointly and severally liable for the tax due up to the date of dissolutionCorrect
  3. CEach partner is liable only for a one-third share of the demand
  4. DNo partner is liable because the demand was determined after dissolution

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 dissolution. It does not matter that the amount was determined after dissolution. A proportionate-share limit, as in the third option, is not in the provision.

Did you get it right without looking?

One question tells you little. A timed set on Liability to Pay in Certain Cases shows your real accuracy, how long you take and where you lose marks.

Practise Liability to Pay in Certain CasesFree diagnostic mock

More Liability to Pay in Certain Cases questions