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Conversation of proprietorship into partnership and its impact on stock transfer under GST

18 February 2020

X is doing business as proprietorship and has a stock of Rs. 35 Lakhs. X has not any input tax credit.

X and Y form a partnership firm and X want to transfer the stock into partnership.

How the stock of proprietorship firm will be transferred to partnership firm?

Is it compulsory to show sale of stock under GST by the proprietorship firm?
OR
Any other way to do so?

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6 Replies

(Guest)

Stock can be transferred from propritership to firm only through sale. I don't think there is another alternative for doing such tranfer.

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Pankaj Rawat (GST Practitioner) (55052 Points)
Replied 18 February 2020

In GST it's supply & GST is applicable.

Yes if the proprietorship busimess cease it's business whole can be transfer his stock to partnership firm by filing ITC 02 .

In conjoint reading of Schedule II Serial No. 4(C,) along with Sl.no.2 of the Notification No.12/2017-Central Tax (Rate) dated 28.06.2017, Transfer of business as an on going concern is a Supply of Service and is NIL rated.

For more details in this regard to transfer the stock plz refer Circular 96/15/2019

anil jain (Partner) (1072 Points)
Replied 20 February 2020

Since Mr X do not have ITC therefore ITC 02 is not required to be filed.

Form ITC 02 is for transfer of ITC.

You transfer the goods by issuing the invoice without charging the GST by availing the exemption as per

Sl.no.2 of the exemption Notification No.12/2017-Central Tax (Rate) dated 28.06.2017

as described by Mr Pankaj.