The West Bengal Authority for Advance Rulings (AAR) has ruled that the going concern transfer service is a supply and attracts a NIL rate of GST.
The applicant, Cosmic Ferro Alloys Limited, is engaged in the manufacture of ferroalloys and cold rolled sections at its two units. The applicant intends to sell one of its units as a whole, which involves the transfer of all assets to the purchaser, including the assumption of all liabilities due and payable at the date of transfer for a fixed consideration.
The applicant has approached the Authority to clarify whether the proposed business transfer transaction as a going concern will fall under Entry No. 2 of Notification No. 12/2017 – The Central Tax and the zero rate GST will apply.
The plaintiff relying on the decision of Gujarat AAR in M/s. The Airports Authority of India has further advised that the supply in question of the going concern transfer service is the supply under Section 7 of the CGST Act and is covered under Entry No. 2 of notification 12/2017-CT(R)
The Authority observed that the BTA stipulates that the buyer must continue to employ the current employees of the unit even after the takeover of the business. In addition, the plaintiff agreed not to be allowed to engage in any business competing with the
activities of the acquirer with respect to an existing business. Both clauses indicate that the business will continue by the buyer with regularity.
The divisional bench of Mr. Brajesh Kumar Singh, Co-Commissioner, CGST and Mr. Joyjit Banik, Co-Senior Commissioner, SGST observed that in order to be considered a going concern, the company must not have the intention or need to liquidate or materially reduce the scale of the transactions. In this context, the Authority mentioned that the applicant did not provide any documentary evidence from the auditor regarding the ability of the entity to continue its activities in the foreseeable future, failing which we cannot conclude that the applicant has neither the intention nor the need to liquidate or materially reduce the scale of the operations. The Authority ruled that “the applicant’s business unit transfer operation involved herein is deemed to be a provision of servicesand further ruled that “the operation would be covered by entry n° 2 of notification n° 12/2017-Central tax (rate) of 28.06.2017 subject to fulfilling the eligibility conditions as a going concern.
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