20 January 2021
An engineering is practicing as a consulting engineer and he had taken a GST registration. The profession was carried for more than 4 years and during the last year, he had purchased some computers and peripherals against which GST input credit was taken. He is also having furniture and other assets. Now he had setup an new consulting llp with two other engineers for which GST registration was also taken. All the assets of the old business was taken over by the newly constituted LLP. Now the old business wants to close its gst registration and book the entire things in the new business. What are the formalities/conditions to be taken care of
06 July 2024
When closing the GST registration of the old consulting business and transferring assets to the newly constituted LLP, here are the steps and considerations to take care of:
1. Transfer of Assets: • Ensure that all assets, including computers, peripherals, furniture, and other assets, are formally transferred from the old business to the new LLP. This transfer should be documented appropriately, possibly through a sale agreement or asset transfer agreement. 2. Input Tax Credit (ITC) Reversal: • Since the old business has claimed GST input tax credit on assets like computers and peripherals, you need to reverse the ITC claimed on these assets when they are transferred to the LLP. • According to GST rules, when capital goods are transferred from one entity to another due to a change in business structure (from proprietorship to LLP in this case), ITC needs to be reversed on the remaining useful life of these assets. This adjustment is required to be done in the GST return of the old business for the month in which the transfer takes place. 3. Filing of Final Return: • The old business needs to file a final GST return, commonly known as GSTR-10, within three months of the date of closure or cessation of the business. This return should reflect the details of all assets sold or transferred to the LLP, including their value and GST implications. 4. ITC Transfer to LLP: • The LLP can take over the ITC balance (if any) from the old business after the assets are transferred. This transfer can be managed through the mechanism provided in GST law for transfer of unutilized ITC in case of business reorganization. 5. Documentation: • Maintain proper documentation of the transfer of assets, including invoices, sale agreements, or any other relevant documents. These documents will serve as proof during audits or inspections.
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