The Hon’ble AAR Uttarakhand exempts business transfer agreement as going concern on slump sale basis from GST, in terms of Sr. No 2 of Notification No 12/2017 Central Tax (rate) dated June 28, 2017 (“Notification No. 12/2017”).
Fact: M/s. Innovative Textile Ltd (“the applicant”) is engaged in manufacturing and selling of textile yarns, fabrics, and garments. The applicant intends to sell their ongoing business of manufacturing, marketing and sale of textile yarn and fabrics, situated at Sitarganj to M/s. SD Polytech (P) Ltd (“the purchaser”), in the form of business transfer as a going concern on a slump sale basis as a whole with all assets and liabilities.
The purchaser has agreed to purchase “Sitarganj Business” as a going concern with all assets and liabilities on slump sale basis on the terms and conditions as set out in the business transfer agreement.
Whether business transfer agreement as a going concern on slump sale basis is exempt from levy of GST, in terms of Notification No. 12/2017?
Applicant’s Interpretation of Law:
The applicant shall handover the physical possession on the appointed transfer date and transfer will get completed on the registry of the land. The applicant further contended that the sale of business as a going concern is exempted by virtue of Sr. No 02 of Notification No. 12/2017.
Further, the applicant relied on the advance ruling passed by the AAR of Karnataka in the case of M/s Rajashri Foods Pvt. Ltd., vide Order No. KAR ADRG 06/2018 dated April 23, 2018 wherein it was observed that “ The transaction of transfer of business as a whole of one of the units of the Applicant in the nature of a going concern amounts to supply of service and is covered under Sr. No.2 of the Notification No. 12/2017 subject to the condition that the unit is a going concern.”
The Hon’ble AAR, Uttarakhand vide its Ruling No. 20/2018-19 dated March 26, 2019 observed that the acquisition of goods or services for commencement of business is covered in definition of business under Section 2(17) of the CGST Act, 2017. Further, as per internationally accepted guidelines issued by His Majesty Revenue & Customs (HRMC) treat transfer of business as a going concern.
Therefore, the authority held that the transfer of business as a going concern on slump sale basis, is exempt from levy of GST as per Sr. No. 2 of Notification No. 12/2017.
Your email address will not be published. Required fields are marked *