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) – Supply of goods and/or services – Intent to sell unit situated at Hiriyur along with all assets and liabilities – Whether the transaction would amount to supply of goods or supply of services or supply of goods & services? – N/N. 12/2017-Central Tax (Rate) dated 28.06.2017 – Whether the transaction would cover under sl.no.2 of the N/N. 12/2017-Central Tax (Rate) dated 28.06.2017?
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Held 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 – the transfer of a going concern constitutes a supply of service – A going concern is a concept of accounting and applies to the business of the company as a whole. Transfer of a going concern means transfer of a running business which is capable of being carried on by the purchaser as an independent business.
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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 challan for ₹ 10,000/-bearing CIN number SB1N17122900184487 dated 19-12-2017 towards the applicable fee. 2. The applicant, having three manufacturing units situated at Ramanagara, Hiriyur and Bengaluru [Seshadripuram], intends to sell 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 capita
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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 the Applicant in their application for advance ruling as well as the submissions made by Sri S. Vishnu Murthy, Chartered Accountant, the authorised representative of the applicant, during the personal hearing. We also considered the questions / issues on which advance rulings have been sought for by the applicant, relevant facts having bearing on the questions / issues raised, the applicant's understanding / interpretation of la
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rking 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 continuity of business. As the unit is said to be functional and is desired to be transferred as a whole to a new owner it amounts to transfer of a going concern as a whole. 7.3 In the backdrop of the aforementioned facts of the case it now needs to be determined whether the transaction amounts to supply of goods or supply of services or supply of both goods and services. 7.3.1 Section 7 of the CGST Act, 2017 defines th
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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 not the whole business. It is the applicants case that the entire business is proposed to be transferred, where all assets and liabilities will be transferred to the new owner and business would have continuity, regularity and permanency, Thus an entire ongoing activity will get transferred, which would include assets of the business, the stock in trade, cash in hand as also the liabilities attached to the business. Furth
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ysis 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 transaction should involve a going concern only. The applicant has only asserted and not proved or shown conclusively that the transaction involves a going concern. 9. A going concern is a concept of accounting and applies to the business of the company as a whole. Transfer of a going concern means transfer of a running business which is capable of being carried on by the purchaser as an independent business, Such transfer o
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