Chapter XVI - Liability to pay in certain cases
Section 85
Section 85: Liability in case of transfer of business
Section 85 makes transferor and transferee jointly and severally liable for pre-transfer GST dues, wholly or to the extent of the business transferred.
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Need advice on Section 85?
This article is for general information. Refer to the Central Goods and Services Tax Act, 2017 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(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 up to 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.
Introduction
A sale, gift, lease, licence or other business transfer does not erase GST liabilities attached to the transferred business.
Key takeaways
Pre-transfer dues
Transferor and transferee are jointly and severally liable for tax, interest and penalty due up to transfer, including amounts determined later, wholly or to the extent transferred.
Post-transfer supplies
The transferee is liable for tax on supplies it makes from the transfer date.
Registration change
If registered, the transferee applies within the prescribed time to amend its certificate.
Pre-transfer dues
Transferor and transferee are jointly and severally liable for tax, interest and penalty due up to transfer, including amounts determined later, wholly or to the extent transferred.
Post-transfer supplies
The transferee is liable for tax on supplies it makes from the transfer date.
Registration change
If registered, the transferee applies within the prescribed time to amend its certificate.
Practical checklist
Do
- Obtain GST due-diligence records before transfer.
- Document the transfer date and transferred business extent.
- Reconcile post-transfer supplies and registration particulars.
Avoid
- Assume a private contract, merger date or restructuring automatically removes statutory GST liability.
Frequently asked questions
Does later determination remove a transferee’s exposure?
No. Section 85 expressly includes pre-transfer dues determined after the transfer.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026