Bought a Business? You May Owe Its GST Dues

A Madras High Court ruling says buying a business under insolvency proceedings does NOT erase its old GST dues. Even in a going-concern sale, tax liabilities can follow the asset. Courts may demand a 25% deposit before hearing any dispute.

Here's what happened: Madras High Court ruled that GST dues of a company are not automatically wiped out when that company is sold as a going concern under IBC liquidation proceedings.. The court rejected the buyer's argument that completing an insolvency sale gives a 'clean slate' from all prior tax liabilities, sending the matter back for fresh adjudication.. As a condition for re-hearing the dispute, the court directed that 25% of the disputed GST amount must be deposited upfront — a standard pre-condition in Indian tax litigation..

What you should do: Check due diligence reports: if you have bought or are buying any distressed business, verify that GST, TDS, and PF dues are explicitly settled or ring-fenced in the resolution plan.. Consult a CA or tax lawyer before closing any NCLT-driven asset deal — ensure the sale order clearly states which statutory liabilities transfer and which are extinguished.. If you receive a GST demand notice on a business you acquired through insolvency, respond within 30 days and do not ignore it — courts may still require a 25% deposit to grant a stay..

Ask your lawyer to get an explicit clause in the sale agreement or NCLT order listing every government due that stands extinguished — vague 'clean slate' language has repeatedly failed in Indian courts.

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