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

Sharma & Verma Traders, a partnership firm, was dissolved on 31 March. Partners were Mr. Sharma, Mr. Verma and Mr. Gupta. On 15 July, after dissolution, an order determined GST of ₹3,00,000 plus interest for supplies made before 31 March. Which statement is correct?

All three persons who were partners are jointly and severally liable for the tax and interest due up to the time of dissolution, even though the order was passed after dissolution. The amount can be determined as if no discontinuance occurred, and recovery of the whole is possible from any partner.

  1. AOnly the partner who managed the firm's GST compliance is liable
  2. BThe dues cannot be determined after dissolution since the firm no longer exists
  3. CEach partner is liable only for one-third of the amount
  4. DEvery person who was a partner is jointly and severally liable for the tax and interest due up to the time of dissolution, even though determined after dissolutionCorrect

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, whether determined before or after dissolution. Hence a proportionate one-third liability (option 3) is wrong, since joint and several liability allows recovery of the whole from any partner.

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