Transfer of business as ‘Going Concern’ is exempt from GST: Karnataka AAR

 845 total views

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.

 

  1. Whether such transaction would be deemed as supply of goods or supply of

Services or both?

  1. 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.

 

 

 

 

Leave a Comment

Your email address will not be published.