Transfer of Going Concern Service is a Supply and Attracts NIL rate of GST: AAR [Read Order]

The West Bengal Authority for Advance Ruling ( AAR ) has held that Transfer of Going Concern service is a Supply and attracts NIL rate of GST.

The applicant, Cosmic Ferro Alloys Limited is engaged in manufacturing of Ferro alloys and Cold Rolled Formed Sections in its two units. The applicant intends to sell one of its unit as a whole which involves transferring of all the assets to the purchaser which includes taking over all the liabilities due and payable as on the date of transfer for a lump sum consideration.

The applicant approached the Authority to clarify whether the proposed transaction of transfer of business as a going concern will fall under the Entry no 2 of the Notification No. 12/2017- Central Tax and NIL Rate of GST will apply.

The applicant by relying the decision of Gujarat AAR in M/s. Airport Authority of India further submitted that the subject supply of Transfer of Going Concern service is Supply under Section 7 CGST Act and is covered at Entry No. 2 of Notification 12/2017-CT(R)

The Authority observed that the BTA refers the purchaser shall continue to employ the current employees of the unit even after the takeover of the business. Furthermore, the applicant has agreed that he shall not be entitled to engage in any business competing with the

activities of the purchaser in respect of existing business. Both the clauses indicate that the business will continue by the purchaser with regularity.

The division bench of Mr Brajesh Kumar Singh, Joint Commissioner, CGST and Mr Joyjit Banik, Senior Joint Commissioner, SGST has observed that to qualify as a going concern, the business must not have intention or necessity of liquidation or of curtailing materially the scale of the operations. In this context, the Authority mentioned that the applicant has not furnished any documentary evidences from the auditor with regard to the entity’s ability to continue in operation for the foreseeable future, in absence of which we are unable to conclude that the applicant has neither the intention nor the necessity of liquidation or of curtailing materially the scale of the operations. The Authority has held that “the transaction of transfer of business unit of the applicant involved in the instant shall be treated as a supply of services” and  further held that “the transaction would be covered under Entry No. 2 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 subject to fulfillment of the conditions to qualify as a going concern.

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