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

Sunrise Traders, a partnership firm, was dissolved on 31 March. Partners Anil, Bhavna and Chetan were partners at dissolution. In July, tax of ₹6,00,000 for periods up to 31 March was determined against the firm and remained unpaid. Which statement is correct under the CGST Act, 2017?

All three partners are jointly and severally liable for the ₹6,00,000. The Act makes every partner liable for dues of the firm up to dissolution, whether determined before or after it, so the department can recover the full amount from any one of them.

  1. AOnly Anil, being the managing partner, is liable
  2. BEach partner is liable only for one-third, i.e. ₹2,00,000, since the firm has ceased to exist
  3. CAnil, Bhavna and Chetan are jointly and severally liable, even though the tax was determined after dissolutionCorrect
  4. DThe liability lapses because the determination was made after dissolution

Explanation

Section 93(3) makes every person who was a partner jointly and severally liable for tax, interest or penalty due from the firm up to dissolution, whether determined before or after dissolution. Hence the revenue may recover the whole amount from any partner. Option B wrongly makes the liability several only.

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