GST Act prescribes that in case of death of the proprietor, the legal heir can proceed with the same business under going concern concept. Not only does it permit the legal heir to continue the same business but also permits transfer of Input Tax Credit (ITC) available in Electronic Credit Ledger of the deceased proprietor. For this purposes FORM GST ITC-02 has been prescribed wherein balance available in deceased proprietor Credit ledger can be transferred to new GSTIN obtained by the legal heir. All such provisions are provided by Section 18 of CGST Act 2017 read with Rule 41 of CGST Rules 2017.
As a layman one would find it legal that since transfer of credit is permitted in law, there cannot be any question at all. But the fact remains that the transfer of ITC can take place only after logging into the GST account of the deceased proprietor. He never authorizes or gives any written consent either to his legal heir or consultants to login to his account. Further it is illegal to use EVC or DSC of such person who does not even exists at the time of filing of FORM GST ITC-02. Logging into the account unauthorizedly or using DSC/EVC is illegal as per section 43 of Information Technology Act 2008. It calls for penalty of Rs. One crore for such offences not only from the person who logs into such account but also the person (in most cases legal heir) who facilitates such unauthorized access.
There is a need that the GST Council must amend the section to introduce the approval system from the GST Department where the account of deceased person can be operated from login of the authorized representative, like Income Tax Act. There is inconsistency between GST Act and Information Technology Act. In US it is seen as one of the grave offences which results into breach of trust towards the person whose online account is accessed unauthorizedly. But here not only account is being logged in, but deceased person’s EVC/DSC is also used even though the person no more exists. CBIC must introduce a mechanism wherein such cases should be reported to the GST Department first and upon verification of legal heir details, death certificate etc. right to access the account should be permitted. Because if that doesn’t happen all the parties involved in filing of FORM GST ITC-02 especially in case of death may be held accountable towards penalty of Rs. One Crore under Information Technology Act.
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