2020 (11) TMI 1039 - AAAR - GST

Classification of supply - supply of goods or supply of services or supply of Goods Services? - transaction would cover SI.No.2 of the Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017 or not? - permissibility to file GST ITC-02 return and transfer unutilised ITC from Vizianagaram, Andhra Pradesh unit to Bengaluru, Karnataka Unit? - In the instant case, whether transaction is qualified to be business being transferred as a going concern to 'another person' or not? - HELD THAT - The concept of distinct person has been newly introduced under GST law. In brief, the establishments of a person with separate registrations whether within the same State/UT or in different States/UTs are considered as 'distinct person. 'A supplier is required to obtain registration in every State/ UT from where he makes taxable supply provided his aggregate turnover exceeds a specified threshold limit. The case at hand doesn't qualify to be a 'going concern to another person', as M/s. Shilpa Medicare Limited, Vizianagaram, A.P and M/s. Shilpa Medicare Limited, Bangalore unit are holders of the same PAN and they are distinct persons. Hence,the provisions of Para 4 (c) of Schedule II of CGST Act, 2017 do not apply in this case. Hence, it is treated as deemed supply of goods. The subsequent questions of applicability of SI.No.2 of the Notification No.12/2017- Central Tax (Rate) dated 28.6.2017 and the transfer of unutilised ITCdon't arise as the transaction is classified as 'supply of goods' between distinct persons. Can ITC-02 be filed for transfer of ITC from the Vizianagaram Unit to the Karnataka Unit? - HELD THAT - There is no supply of service but a supply of goods (assets of the Vizianagaram Unit to the Unit in Karnataka State). Therefore, the question of transfer of ITC would not arise - In the instant case, there is no evidence of change in the constitution of the registered person . A change in the constitution would envisage a change from say a proprietorship entity to a Partnership or a Company, or from a Partnership to a Company; or change in the constitution of the Shareholders, etc. There is no such thing happening in this case. M/s. Shilpa Medicare Limited, Vizianagaram is one and the same entity as M/s. Shilpa Medicare Limited, Bangalore, Karnataka. There is no change in the constitution of the entity as required under Section 18 (3) of the CGST Act and therefore the provisions for transfer of ITC under Section 18 (3) would not be permissible in this case. Further, the GST law comprising of the Central GST Act, the Integrated GST Act and State / UT GST Acts, does not envisage the transfer of ITC in the form of CGST and SGST / UTGST accumulated in one State to another State. The scope of the AP GST Act cannot extend beyond the territory of the State of Andhra Pradesh. Similarly, the KSGST Act cannot extend beyond the borders of the State of Karnataka. Credit (ITC) accumulated under a particular State GST Act cannot be utilized in another State as there is no such provision under the extant law. Therefore, due to the exclusivity of ITC earned in a State, M/s. Shilpa Medicare Limited, Vizianagaram are not entitled to transfer the ITC earned in the State of Andhra Pradesh to themselves in the State of Karnataka. Hence, the facility of transfer of Credit using Form ITC-02 is not available in this case.

Summary

Issues Involved:
1. Classification of the transaction as supply of goods or services.
2. Applicability of SI.No.2 of Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017.
3. Eligibility to file GST ITC-02 return and transfer unutilized ITC.

Detailed Analysis:

1. Classification of the Transaction as Supply of Goods or Services:
The appellant, the Deputy Commissioner of Central Tax, Vizianagaram, contested the ruling by the Authority for Advance Ruling (AAR) that the transfer of business by M/s. Shilpa Medicare Limited from Vizianagaram, Andhra Pradesh to Bengaluru, Karnataka is a supply of services. The appellant argued that the transaction should be classified as a supply of goods, referencing Para-4(c) of Schedule II of the CGST Act, 2017, which states that goods forming part of the assets of any business shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person unless the business is transferred as a going concern to another person. The appellant emphasized that since the transfer was to a distinct but same person (same PAN), it does not qualify as a transfer to another person, thus it should be classified as a supply of goods.

2. Applicability of SI.No.2 of Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017:
The appellant argued that since the transaction cannot be categorized as a supply of services, it does not fall under SI.No.2 of Notification No. 12/2017-Central Tax (Rate), which exempts services by way of transfer of a going concern as a whole or an independent part thereof from GST.

3. Eligibility to File GST ITC-02 Return and Transfer Unutilized ITC:
The appellant contended that the provisions of Section 18(3) of the CGST Act, 2017, which allow for the transfer of unutilized input tax credit (ITC) in the event of a change in the constitution of a registered person, do not apply in this case. They argued that there was no change in the constitution of the business, as both units in Andhra Pradesh and Karnataka are under the same PAN and thus are distinct persons but not separate entities. The appellant also highlighted that the GST law does not permit the transfer of ITC from one state to another.

Discussion and Findings:
The Appellate Authority examined the arguments and concluded that the transaction is a supply of goods, not services. They referenced Section 25(4) and Section 25(5) of the CGST Act, 2017, which treat establishments with separate registrations as distinct persons. Since the transfer was between distinct persons (same PAN), it does not qualify as a transfer to another person, thus it is a supply of goods. Consequently, the applicability of SI.No.2 of Notification No. 12/2017-Central Tax (Rate) and the transfer of unutilized ITC using Form ITC-02 do not arise.

Order:
The ruling of the AAR was set aside. The transaction was classified as a supply of goods and taxable accordingly under the CGST/APGST Act, 2017. M/s. Shilpa Medicare Limited, Vizianagaram, was not entitled to file Form ITC-02 for the transfer of ITC to their Bengaluru unit in Karnataka.