Liability in case of transfer of business
Section 85, CGST Act
Straight from CBIC
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In one line
When a business is transferred (sale, lease, etc.), the transferor and transferee are jointly and severally liable for any GST dues up to the transfer date.
What this means in practice
The parts that actually decide cases — the things a practitioner checks first.
Joint and several liability for dues UP TO the date of transfer – a slump-sale or business-transfer agreement must carry a GST indemnity and a dues certificate.
If the transferee carries on the business under a different name, he must be registered afresh from the date of transfer.
Transfer of a business as a going concern is itself exempt from GST (entry 2 of Notification 12/2017-CTR), but the exemption does not touch this liability.
Questions people actually ask
Real questions we get on this provision, answered straight.
We are buying a running business. What GST exposure do we inherit?+
Everything due up to the transfer date, jointly and severally, under section 85 – whether or not it has been assessed yet. Get the seller’s returns, ledgers and any pending notices reviewed, take an indemnity, and consider withholding part of the consideration until the periods run out.
How this provision is built
The skeleton, clause by clause — useful when a notice cites a specific sub-clause.
The exact words of the law
1,044 characters, uneditedReproduced from the CBIC text. We explain it above — but you should always be able to read it yourself.
Read the full provision+
(1) Where a taxable person, liable to pay tax under this Act, transfers his business in whole or in part, by sale, gift, lease, leave and license, hire or in any other manner whatsoever, the taxable person and the person to whom the business is so transferred shall, jointly and severally, be liable wholly or to the extent of such transfer, to pay the tax, interest or any penalty due from the taxable person upto the time of such transfer, whether such tax, interest or penalty has been determined before such transfer, but has remained unpaid or is determined thereafter.
(2) Where the transferee of a business referred to in sub-section
(1) carries on such business either in his own name or in some other name, he shall be liable to pay tax on the supply of goods or services or both effected by him with effect from the date of such transfer and shall, if he is a registered person under this Act, apply within the prescribed time for amendment of his certificate of registration.
High Court cases on this section
Judgments in our index that cite this provision. Being listed does not make a case good law — it may have been appealed or distinguished since. Read it before relying on it.
DHANASEKARAN v. The Assistant Commissioner of GST and Central Excise,
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RAJESH BALAKRISHNA KUMAR v. COMMISSIONER OF GST (APPEALS )
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ALOKE PAUL v. DEPUTY COMMISSIONER CGST AND CENTRAL EXISE AND ORS
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GLOBAL CONSTRUCTION THROUGH ITS PROPRIETOR MUKESH TRIPATHI v. UNION OF INDIA THROUGH ITS PR COMMISSIONER CENTRAL GOODS AND SERVICE
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What changed, and when
The amendment trail, newest first — because the version that applies to your case depends on the period.
2017-07-01 · Commenced
Provision as originally enacted in the CGST Act, 2017 (Act 12 of 2017) and brought into force w.e.f. 01-07-2017.
Where this comes from
Text reproduced from the Central Board of Indirect Taxes and Customs, as available on 2026-09-05. The explanation and practice notes above are GSTZone’s own, written for this hub. If you spot anything out of date, tell us and we’ll fix it — this hub is checked daily against CBIC.
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Does this apply to your case, or not?
Reading the section is one thing. Knowing whether it bites on your facts, and what it costs if it does, is another. Send us the situation – we will tell you straight, and only take it on if we can genuinely help.
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