2020 (4) TMI 67 - AAR - GST

Business Transfer Agreement - Applicability of exemption Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - going concern which consists of transferring under-construction project - HELD THAT - The acquisition of goods/ services for commencement of business is covered under the said definition. A transfer of a business as a going concern is the sale of a business including assets. In terms of financial transaction 'going concern' has the meaning that at the point in time to which the description applies, the business is live or operating and has all parts and features necessary to keep it in operation. Thus Transfer of a going concern' in a simple way can be describe as transfer of a running business which is capable of being carried on by the purchaser as an independent business. In the present case, the applicant is carrying on the business of constructing residential/commercial complexes and selling thereof and the applicant firm come into existence particularly for the said project. Further on perusal of the sale deed dated 24.10.2019, we find that the applicant has sold the under-construction building, as a whole, situated at village- Manoharpur, Pargana-Jwalapur, District-Hardwar with its all assets and transfer the rights of the same to the buyer including the approved map from the competent authority. The buyer has purchased the under-construction building/business to carry on the same kind of business as the purchaser themselves engaged in constructing residential/commercial complexes and selling thereof. Further as on date there is no series of immediately consecutive transfers of the said business. Thus, the applicant has transfer the business as a going concern to M/s. Ronav Infrastructure and it may treated as supply of services and as per serial no. 2 of the Notification No.12/2017-CentraI Tax (Rate) dated 28.06.2017 (as amended from time to time), the same is exempted from levy of GST as on date.

Summary

Issues:
- Interpretation of the applicability of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 on a Business Transfer Agreement involving an under-construction project.

Analysis:
1. The application was made under Sub-Section (1) of Section 97 of the CGST/SGST Act, 2017 seeking a ruling on whether a Business Transfer Agreement concerning an under-construction project falls under the exemption of GST as per Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

2. The Advance Ruling under GST involves decisions provided by the authority on matters related to the supply of goods or services undertaken by the applicant. The applicant sought clarification on the applicability of the mentioned notification for their specific case.

3. The applicant sought the ruling based on the provisions outlined in Section 97(2) of the Act, which includes aspects like classification of goods/services, applicability of notifications, determination of tax liability, input tax credit, registration requirements, and whether certain activities constitute a supply of goods/services.

4. The authority admitted the application for ruling on the applicability of the exemption notification to the Business Transfer Agreement involving the under-construction project.

5. The applicant, a partnership firm engaged in construction activities, provided detailed submissions regarding the project, the agreement with the buyer, and the nature of the transfer of the under-construction building.

6. The authority examined the specifics of the sale deed dated 24.10.2019, which included details of the assets transferred, rights granted to the buyer, and obligations of the purchaser regarding the under-construction project.

7. The definition of 'business' as per Section 2(17) of the Act was analyzed to determine if the transfer of goods/services for the commencement of business falls within its scope. The concept of 'going concern' was also explained in the context of the transaction.

8. International guidelines regarding the treatment of the transfer of a business as a going concern were referenced to assess the nature of the transaction between the applicant and the buyer.

9. After a comprehensive review of the facts and legal provisions, the authority concluded that the transfer of the business as a going concern to the buyer exempted it from GST as per serial no. 2 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

10. The ruling clarified that the transfer of the business in question, involving the under-construction project, qualifies as a going concern and is exempt from GST as per the specified notification.

This detailed analysis outlines the key aspects considered by the authority in interpreting the applicability of the GST exemption to the Business Transfer Agreement involving the under-construction project as per the relevant legal provisions and definitions.