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Section 85 of the CGST Act, 2017

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GST›CGST Act, 2017›Chapter XVI, Liability to Pay in Certain Cases

At a glance

Bars, duties and time limits

85(1)Transferor and transferee bear joint and several liability, wholly or to the extent of the transfer, for tax, interest and penalty due up to transfer, whether determined before or afterwards.
85(2)A transferee continuing the business in any name is responsible for tax on their supplies from the transfer date and, if registered, must apply for registration amendment within the prescribed time.

Procedure, powers and definitions

85(1)The law does not settle whether a partial transferee bears all earlier dues or only a portion, or how that portion is measured.

A transfer of a business can carry joint and several responsibility for earlier tax, interest and penalty. The rule covers transfers of the whole business or part of it, however effected, including amounts determined after transfer. A transferee continuing the business must account for supplies from the transfer date and, if already registered, seek amendment of the registration certificate.^[1]

Quick facts

Section 85, CGST Act, 2017

Liability in case of transfer of business

Provision
Act	Central Goods and Services Tax Act, 2017
Chapter	XVI, Liability to Pay in Certain Cases
Section title	Liability in case of transfer of business
Amendments
Last amendment	1 July 2017: brought section 85 into force (none — the source's own enforcement note, not an amendment footnote)
Amendments	1 footnote in the CBIC text (table)
Related provisions
Rules	Rule 19 of the CGST Rules, 2017
Sections	2, 22, 28, 87
Structure 85(1) opening wordsThe transfer of the business 85(1) "to pay the tax, interest or any penalty due from the taxable person upto the time of such transfer"The dues that the transfer carries 85(1) "shall, jointly and severally, be liable wholly or to the extent of such transfer"Joint and several liability and its extent 85(2) first limbThe transferee carrying on the business 85(2) closing words, with rule 19Amendment of the certificate of registration
Source
Law text	CBIC tax information portal, served on 17 September 2026^[1]
Questions reviewed	Prashant Prakash, 22 September 2026

Text

The text below is the section as served by the CBIC tax information portal on 17 September 2026, with the portal's own amendment footnote markers (shown as small numerals before a bracket) and its footnotes.^[1] The Act as published in the Gazette of India is the legal source.

Section 85, verbatim (show)

* Section 85. Liability in case of transfer of business.-

(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.

Questions to answer on the file

Questions a reviewer answers from the engagement file, grouped by the part of the section they come from. They describe what the section asks; they do not decide it.

Scope the section as a whole

Questions to answer on the file2 questions

What is the matter, from the things this section speaks about?
Did the transfer take place on or after 1 July 2017?

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The transfer of the business 85(1) opening words

Questions to answer on the file5 questions

Has a business carried on by a taxable person been transferred?
Was the transferor a taxable person liable to pay tax under this Act?
Was the whole of the business transferred, or a part of it: the whole of the business or part of the business?
In which manner was the business transferred: sale, gift, lease, leave and license, hire or any other manner whatsoever?
What is the date of the transfer?

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The dues that the transfer carries 85(1) "to pay the tax, interest or any penalty due from the taxable person upto the time of such transfer"

Questions to answer on the file4 questions

On what account is the amount due: tax, interest or penalty?
Does the amount relate to the time up to the transfer?
When was the amount determined: determined before the transfer, but has remained unpaid or determined thereafter?
What is the amount of tax, interest or penalty due from the transferor up to the time of the transfer?

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Joint and several liability and its extent 85(1) "shall, jointly and severally, be liable wholly or to the extent of such transfer"

Questions to answer on the file3 questions

Which person is: the taxable person who transferred the business or the person to whom the business is so transferred?
Are both persons liable jointly and severally for the dues up to the transfer?
To what extent is the liability cast on the person: wholly or to the extent of such transfer?

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The transferee carrying on the business 85(2) first limb

Questions to answer on the file4 questions

Is the transferee carrying on the transferred business?
In whose name is the transferee carrying on the business: in his own name or in some other name?
Has the transferee effected any supply of goods or services or both since the date of the transfer?
From which date does the transferee's own liability to pay tax run?

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Amendment of the certificate of registration 85(2) closing words, with rule 19

Questions to answer on the file4 questions

Is the transferee a registered person under this Act?
If so: has the transferee applied for amendment of his certificate of registration on account of the transfer?
If question 1 is answered yes: was that application made within the time the rules prescribe?
If question 1 is answered yes: was that application made in the form the rules prescribe?

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Amendment history

The CBIC text carries 1 footnote. The table gives each in the source's own terms. Effective dates are as the footnotes state them.^[1]

Amendments to section 85 as footnoted in the CBIC text
Note	Change	Instrument	Effective from
	brought section 85 into force	none — the source's own enforcement note, not an amendment footnote	1 July 2017

Provisions connected to Section 85
Provision	Connection	Words that tie them
Section 2	this provision defined by Section 2 clause (107)	2(107) "taxable person means a person who is registered or liable to be registered under section 22 or section 24"
Section 28	85(2) requires Section 28	85(2) "apply within the prescribed time for amendment of his certificate of registration"
Rule 19 of the CGST Rules, 2017	85(2) prescribed by Rule 19 of the CGST Rules, 2017	85(2) "within the prescribed time"; rule 19(1) "the registered person shall, within a period of fifteen days of such change, submit an application... in FORM GST REG-14"
Section 22	Section 22 sub-section (3) same as 85(2)	22(3) speaks of the transferee or successor being liable to be registered from the date of the transfer, and 85(2) makes him liable to pay tax on supplies effected by him "with effect from the date of such transfer"
Section 87	Section 87 same as this provision	both sit in the chapter on liability to pay in certain cases and carry a liability across a change in the person carrying on the business

Circulars and notifications

Circulars and notifications in the CBIC repository that cite this section, newest first, by number, date and subject. A listing here does not say what an instrument decides; read the instrument.

Circulars (1)

Number	Date	Subject
Circular No. 96/15/2019-GST	28 March 2019	Seeks to clarify issues in respect of transfer of input tax credit in case of death of sole proprietor.

Unsettled questions

The words of section 85 do not answer this question. Where one decides a matter on the file, the answer depends on the position taken on it.

Sub-section (1) makes the transferor and the transferee liable "wholly or to the extent of such transfer" and nowhere says which of the two applies. On a transfer of part of a business, is the transferee liable for the whole of the dues up to the transfer, or only to the extent of what was transferred, and what measures that extent?

See also

Section 28 of the CGST Act, 2017: amendment of registration
Rule 19 of the CGST Rules, 2017: amendment of registration
Section 87 of the CGST Act, 2017: liability in case of amalgamation or merger of companies

References

Central Board of Indirect Taxes and Customs. "Section 85. Liability in case of transfer of business". Central Goods and Services Tax Act, 2017, CBIC tax information portal, with amendment footnotes 1 to 1. Retrieved 17 September 2026.

External links

CGST Act, 2017, Section 85 on the CBIC tax information portal