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

Sharma & Verma Traders, a partnership firm with partners Sharma, Verma and Gupta, was dissolved on 31 March. GST, interest and penalty of Rs 5,00,000 for periods up to dissolution were determined in July of the same year and remain unpaid. Which statement is correct?

All three partners are jointly and severally liable for the full Rs 5,00,000. On dissolution, every person who was a partner is liable for dues up to the dissolution, even if they were determined afterwards, so liability is not restricted to profit share or to one partner.

  1. AOnly Sharma, being the managing partner, is liable
  2. BEach partner is liable only for the share of profit he held in the firm
  3. CEvery person who was a partner at the time of dissolution is jointly and severally liable for the Rs 5,00,000Correct
  4. DNo one is liable as the firm ceased to exist before determination

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. So the revenue can recover the full amount from any partner. Option B is wrong because liability is not limited to profit share.

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