Section 85 prevents a business from shedding its GST dues by changing hands. Whoever transfers the business, and whoever takes it, answer together for what was due up to the date of transfer.
Key points
- Under section 85(1) of the CGST Act, 2017, where a taxable person transfers its business, wholly or partly, by sale, gift, lease, leave and licence, hire or otherwise, the transferor and the transferee are jointly and severally liable — wholly, or to the extent of the transfer — for tax, interest and penalty due from the transferor up to the time of transfer, whether determined before or after.
- The transferee carrying on the business is liable for tax on its own supplies from the date of transfer, and, if already registered, must apply for amendment of its registration within the prescribed time (section 85(2)).
The provisions
85(1)–(2)Liability in case of transfer of business
Statutory text
(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.
* Enforced w.e.f. 1st July, 2017.
Statutory text as published on the CBIC tax information portal, as on 03.10.2026; the numbered notes record each amendment. Official source
Common questions
- Is the buyer of a business liable for the seller's GST dues?
- Yes. Under section 85 of the CGST Act the transferor and transferee are jointly and severally liable for tax, interest and penalty due up to the date of transfer.
Commentary and case notes checked against the judgments and CBIC sources on 04.10.2026.
What it means
The liability attaches whether or not the dues had been determined at the time of transfer. A transferee should therefore obtain details of pending notices and returns before taking over a business. On transfer, the transferor may transfer unutilised input tax credit to the transferee under section 18(3) and Rule 41 if the liabilities are also transferred.