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

Sunrise Traders LLP, registered under GST, had partners Anita and Bhavin. On 1 April, Anita retired and Chetan was admitted, changing the constitution of the LLP. A demand of ₹3,00,000 relates to supplies made in the preceding financial year. Which statement is correct?

Anita, Bhavin and Chetan are jointly and severally liable. An LLP is treated as a firm, and on reconstitution the partners both before and after the change are liable for tax, interest or penalty relating to periods before the reconstitution.

  1. AOnly Anita and Bhavin, the partners in the earlier period, are liable
  2. BOnly Bhavin and Chetan, the partners after reconstitution, are liable
  3. CChetan alone is liable because he is the new partner
  4. DThe partners as the LLP existed before and as it exists after reconstitution are jointly and severally liable for the pre-reconstitution periodCorrect

Explanation

An LLP is treated as a firm for this Chapter. On a change in constitution, the partners as it existed before and as it exists after reconstitution are jointly and severally liable for dues for any period before reconstitution. So Anita, Bhavin and Chetan are all liable; restricting liability to either group is wrong.

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