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Transfer of Unutilized Input Tax Credit Under GST in Case of Death of a Sole Proprietor

The concept of “Perpetual Existence” is not a common feature of a Sole Proprietorship concern. Once the proprietor dies, the business is over! So one might ask, “is there no way a sole proprietorship business can achieve continuity?” 

Let’s say the proprietor willed his business concern to his legal heir and this heir continues it. In such case, the business continues to exists, provided that the requirements under various statutory regulations are complied with.   

GST Provision for ITC transfer to New Registration

Let’s take an example of Mr Junior. 

Mr Junior inherits the business “M/s XYZ & Co” (a concern registered under the GST Act) of his deceased father Mr. Senior having PAN ABCPD1234E. 

The PAN under which the concern is registered becomes void on death of Mr Senior. So now, Mr Junior has two options – either continue the business or close it down. But in either case, he has to cancel the GST registration taken by Mr Senior.

Mr Junior decides to register M/S XYZ and Co under his PAN and obtain a new GSTIN. On date of cancellation of old GSTIN, M/s XYZ & Co had a substantial Input credit balance. Mr Junior wishes to take benefit of this. So he approaches a consultant to know the possibility.

The Consultant advised him to keep application for cancellation of Old GSTIN on hold and file an application for transfer of ITC to new registration thereby he can get the carry forward of unutilised ITC from the old GSTIN.

How it works?


Step 1:- Mr. Junior should file new Form GST REG - 01 mentioning reason for registration as “Death of Sole Proprietor”. This Form can be filed electronically in GST portal.

Step 2:- Mr. Junior, as the legal heir of Mr. Senior, can file Form GST ITC 02 to transfer the existing GST Credit available in credit ledger of Mr. Senior to his credit ledger under new GSTIN.

Step 3:- Once the transfer is complete, Mr. Junior can proceed to file applicant for cancellation of the old GSTIN.

What are the prerequisites for filing Form GST ITC 02?

a) Both Transferor (Mr Senior) and Transferee (Mr Junior) should have GST Registration.

b) Transferor should have filed all pending returns till date of transfer and all outstanding liabilities has been set-off fully and interest/penalty if any has been fully paid off

Do I need the Assistance of a Chartered Accountant to file Form GST ITC 02?

One of the requirements to file Form GST ITC 02 is matching the amount of credit available to the credit that can be transferred. So to certify the availability, the transferor needs to obtain a certificate for a Chartered Accountant and attach a scanned copy of the same while filing the Form GST ITC 02 in portal.