CGST Act provisions establish tax recovery liability for business successors during restructurings

Sections 85 through 94 of the Central Goods and Services Tax Act safeguard state revenue recovery by fixing statutory tax liabilities on successors and responsible persons during business transformations. These rules apply when a commercial entity undergoes a sale, merger, amalgamation, lease, dissolution, or transfer of ownership. Under this statutory framework, the successor or transferee inherits the pending tax dues, liabilities, and penalty obligations of the predecessor entity, preventing businesses from evading tax arrears through restructuring.

Previously, corporate reorganizations occasionally created recovery loopholes, but these sections ensure continuity of tax liability against the surviving corporate entity or legal representative. Tax auditors and corporate advisors must conduct thorough compliance checks and obtain indemnity clauses when structuring mergers, acquisitions, or asset transfers. Monitor official clarifications and tribunal rulings concerning successor liability parameters.

Bottom line: thorough due diligence on pending tax liabilities prevents unexpected financial burdens on business buyers and successors.