Slump sale between related parties- Taxability and Valuation under GST
By: – Balasubramanian Natarajan
Goods and Services Tax – GST
Dated:- 18-6-2018
Slump sale between related parties- Taxability and Valuation under GST
The following questions came up for consideration before AAR-Karnataka in the case of M/S RAJASHRI FOODS PVT. LTD-[ 2018 (5) TMI 1651 – AUTHORITY FOR ADVANCE RULING – KARNATAKA ]
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?
The AAR ruled as under:
AAR has held that it is a supply of service
Ruling: – The transaction of transfer of business as a whole of one of the units of the Applicant in the nature of a going conce
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ified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.
Invoice by the supplier in case of slump sale:
In this case tax invoice cannot be issued. Instead he has to issue Bill of supply as per Section 31(3)( c ) as given below:
(c) a registered person supplying exempted goods or services or both or paying tax under the provisions of section 10 shall issue, instead of a tax invoice, a bill of supply containing such particulars and in such manner as may be prescribed:
As such the question of ITC on such transaction does not arise.
Input Tax Credit of ITC transferred on slump sale -On transfer of business
The other issue which needs to be examined is the availability if ITC balance transferred as part of slump sale-
CGST Act, 2017-Section 18 (3) Where the
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in the case of demerger, the input tax credit shall be apportioned in the ratio of the value of assets of the new units as specified in the demerger scheme.
(2) The transferor shall also submit a copy of a certificate issued by a practicing chartered accountant or cost accountant certifying that the sale, merger, de-merger, amalgamation, lease or transfer of business has been done with a specific provision for the transfer of liabilities.
(3) The transferee shall, on the common portal, accept the details so furnished by the transferor and, upon such acceptance, the un-utilized credit specified in FORM GST ITC 02 shall be credited to his electronic credit ledger.
(4) The inputs and capital goods so transferred shall be duly accounted for by the transferee in his books of account
As such the transferee is entitled to the ITC transferred as part of transfer business as a going concern in the form of slump sale.
Valuation:
CGST Rules 2017 – Rule 28 deals with valuation between rela
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ded further that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the goods or services
30. Value of supply of goods or services or both based on cost.-Where the value of a supply of goods or services or both is not determinable by any of the preceding rules of this Chapter, the value shall be one hundred and ten percent of the cost of production or manufacture or the cost of acquisition of such goods or the cost of provision of such services.
In this case the following are to be noted
* Open market value – Slump sale is not an open market sale , since it is not normally made available In the market
* Each slump sale is unique and there cannot be any services of a like kind and quality
* The proviso is not applicable as it is not intended for further supply as such
* Cost of production or manufacture is not applicable
* Cost of acquisition is not applicable as the supply is one of ser
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