Transfer of business as ‘Going Concern’
is exempt from GST: Karnataka AAR
[Rajashri Foods (P.) Ltd., In re- [2018] (AAR-Karnataka)]
Accroding to Schedule II the entry at serial number 4 refers to „Transfer of business assets‟. Transfer of business assets is considered as supply of goods.
According to Notification, No. 12/2017- Central Tax (Rate) dated 28th June 2017. Services by way of transfer of a going concern, as a whole or an independent part thereof‟. This indicates that the activity of transfer of a going concern constitutes a supply of service. The Notification further provides „Nil‟ rate of tax on such a supply.
Facts of the case:
- The Assessee has carried out 3 business unit & wants to sell its one of the unit situated at Hiriyur along with all its fixed assets namely land, building, plant & machinery etc., current assets namely stock & trade receivables etc., and liabilities namely Bank term loans, bank working capital loans, creditors for supplies etc., for a lump sum consideration.
- Assessee filed an application for Advance Ruling on the following two issues.
- Whether such transaction would be deemed as supply of goods or supply of
Services or both?
- Whether such transaction would be exempt under S. No. 2 of the Notification
No.12/2017-Central Tax (Rate), dated June 28, 2017
Held:
Following observations were found:
- Authority found that the unit sought to be sold is a fully functional unit and the transaction contemplates the transfer of the entire business to a new person, who would not only enjoy a right over the assets but shall also take over the liabilities.
- In Schedule II the entry at serial number 4 refers to „Transfer of business assets‟. Transfer of business assets is considered as supply of goods. The transfer of business assets implies that a part of the assets are transferred and not the whole business.
- Further in part 4(c) of Schedule II it is provided that when the business is transferred as a going concern then it does not amount to supply of goods. It, therefore, becomes clear that such transfer of business does not constitute a supply of goods as well as deemed supply of goods.
- Answer of the second question is given by the authority saying that The transaction of transfer of one of the units of the Applicant as a going concern is covered under Sl.No.2 of the Notification No.12/2017- Central Tax (Rate) dated 28.06.2017 subject to the condition that the unit is a going concern.
