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Question ID : 36903

conversion of proprietary into partnership

I would like to convert a proprietary business into partnershp by drafting a p.deed and planning to avail input credit on stocks as provided u/s18(3)of CGST Act. In this regard, my queries are; 1. Whether the erstwhile proprietor has to raise a tax invoice on the Partnership Firm in view of para 1 of Sch. 1 of the act? But the newly formed partnership firm would continue the same books of account whcih is being operated by the proprietor. How accounting has to be done. 2.On the other hand, Stock being a business asset, it is not at all a supply in view of para 4(c) of Sch II of CGST act.

Posted by K.V.V.SATYANARAYANA on Dec 26, 2018

Filed Under GST

Answer ID : 76100

a. Conversion would be effected as below: 1. Raise a Tax Invoice for the assets (in this case inventory/stocks) for a consideration which value as is appearing in the books of proprietary business as on date of transfer (WDV rate so to say). 2. The draft deed should have clause explaining the above mode of transfer 3. The erstwhile books on closure per date of transfer to new partnership firm can be very well the opening balance sheet (meaning complete financial statements, books of accounts etc., ) for the firm as such. 4. The value of consideration could very well be the partner's capital in the new partnership firm 5. Already explained how accounting to be done. Repeat: The opening balance sheet for the firm to be the closing balance sheet for the proprietary business. 6. You CANNOT take the stand that "stock" is not a supply as this is a case of "transfer" and transfer as defined in GST act is also a 'supply' CA ANL MADHAVANN

Posted by CA. MADHAVANN A N L on Dec 27, 2018
Answer ID : 76105

Issue tax invoice in favour of partnership firm and take credit in partnership firm ( better approach) Alternatively FILE ITC-02 on the portal for transfer of credit

Posted by CA JEET REWRI on Dec 27, 2018
Answer ID : 76115

You Should simply transfer the ITC Balance in Proprietors GST Login to Partnership Firm's GST GST Login by filing ITC-02 and take a simple entry in books as Debiting GST Receivable and Crediting Partner's Capital. And all the Stock, Assets, etc must be carried forward as it is in compliance with Section 45 (3) of the Income Tax Act.

Posted by Ashish Kumar Goyal on Dec 28, 2018