In Re : M/s Rajashri Foods Pvt. Ltd
GST
2018 (5) TMI 1651 – AUTHORITY FOR ADVANCE RULING – KARNATAKA – 2018 (13) G. S. T. L. 221 (A. A. R. – GST), [2018] 2 GSTL (AAR) 109 (AAR)
AUTHORITY FOR ADVANCE RULING – KARNATAKA – AAR
Dated:- 23-4-2018
Advance Ruling No. KAR ADRG 06/2018
GST
Sri, Harish Dharnia, Member (Central Tax) and Dr. Ravi Prasad M.P. Member (State Tax)
ORDER UNDER SUB-SECTION (4) OF SECTION 98 OF CENTRAL GOODS AND SERVICE TAX ACT. 2017 AND UNDER SUB SECTION (4) OF SECTION 98 OF KARNATAKA GOODS AND SERVICES TAX ACT, 2017
M/s Rajashri Foods Private Ltd,, (hereinafter referred to as 'Applicant' holding GSTIN number 29AAACR6946B1ZC, having registered address at #17, Platform Road, Seshadripuram, Bengaluru – 560020 have Filed an application in form GST ARA-01 on 19,12.2017 seeking Advance Ruling under Section 97 of CGST Act, 2017, KGST Act, 2017 & IGST Act, 2017 read with Rule 104 of CGST Rules 2017 & KGST Rules 2017. They enclosed copy of challa
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ed.
PERSONAL HEARING PROCEEDINGS HELD ON 09.01.2018.
4. Sri S. Vishnu Murthy, Chartered Accountant and the authorised representative of the Applicant appeared and presented the case as follows
a. That the unit in question, which is intended to be sold, is an independent one and is Involved in the manufacture of animal feeds.
b. This unit has fixed assets in the form of land, building, plant and machinery and current assets in the form of inventory and receivables. It has also availed term loans from the bank for the purpose of setting up of the unit and working capital loans availed from the banks for meeting the working capital requirements. The unit has also liabilities in the form of sundry creditors and certain outstanding liabilities.
c. The proposed transaction of sale of unit as a whole involves transferring of all the assets to the purchaser and also taking over of all the liabilities by the purchaser.
FINDINGS & DISCUSSION:
5. We have considered the submissions made by
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f their application that they intend to sell one of their animal feed manufacturing units operational since 1990. Further it has been contended that this unit besides having fixed assets in the form of land, building, plant and machinery has current assets like receivables, inventory etc. Further the said unit is stated to have term loans availed from the banks for setting up of the unit and also working loans for working capital requirements. Furthermore the unit has sundry creditors as well as outstanding liabilities. It has been summarised that the transaction envisages the transfer of all assets to the buyer and the buyer shall also take over all the liabilities.
7.2 The aforesaid statement of facts conveys 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. It thus postulates that there will be a co
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cern, either as a whole or an independent part thereof, for a lump sum consideration does not constitute an activity taking place in the course of business or for furtherance of business, However since the word 'includes' has been used in Section 7(1) the scope of supply goes beyond the meaning of the expression 'in the course or furtherance of business', Therefore in the case of the transfer of a going concern even if the act of transfer does not constitute an activity carried out in the course of regular business or for furtherance of business, the activity may still qualify to be termed as a supply.
7.3.2 Section 7(1) (d) stipulates that activities referred to in Schedule II shall be treated as supply of goods or supply of services. 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 n
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le in the said Notification gives the description of the services. Serial number 2 of the Notification provides for '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 or service. The Notification further provides 'Nil' rate of tax on such a supply.
On the basis of the aforementioned analysis we conclude that the transfer of a going concern constitutes a supply of service.
8. The second question for which a Ruling has been sought is whether the transaction would cover under si.no.2 of the Notification No. 12/2017-Central Tax (Rate] dated 28.06.2017?
8.1 The notification itself speaks that the activity of transfer of a going concern, as a whole or independent part thereof, is exempt from payment of so much Central Tax leviable under sub-section (1) of section (9) of the CGST Act, 2017. The essential condition in-buiit in the Notification is that the
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