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2023 (4) TMI 959 - AAR - GSTSupply or not - transfer of business - going concern or not - transfer of business by M/s. Airports Authority of India to M/s. Adani Jaipur International Airport Limited is covered under the Entry No. 2of the exemption notification No 12/2017 - Central Tax (Rate) dated 28-06-2017 issued u/s Section 11 of CGST Act 2017 or not - levy of GST on the transfer of Existing assets ( RAB ), Aeronautical Assets, non-aeronautical assets and Capital work in progress by M/s. Airport Authority of India to the M/s. Adani Jaipur International Airport Limited - transfer of asset be treated as services and the classification or not - concession fees paid by M/s. Adani Jaipur International Airport Limited to M/s. Airports Authority of India be treated as consideration for transfer of business or not - Monthly/Annual concession fees charged by the Applicant on the M/s. Adani Jaipur International Airport Limited - invoice raised by the Applicant for reimbursement of the salary/ staff cost on M/s. Adani Jaipur International Airport Limited - reimbursement claimed of Municipal tax, Property Tax and Water Charges by the Applicant from M/s. Adani Jaipur International Airport Limited - reversal as required in accordance with section 17 (2)/ (3) of CGST Act viz-a-viz RGST Act. Whether the business module executed through agreement between M/s. AAI and M/s. ADIAL is transfer of business or not? - HELD THAT - The applicant i.e. Airports Authority of India (AAI) is the authority created under the Airports Authority of India Act, 1994 (AAI Act). AAI Act was enacted to provide for the constitution of the AAI for the better administration and cohesive management of the airports. AAI has been created for the purposes of establishing or assisting in the establishment of the airports and for matters connected thereto. On referring the definition of Goods in CGST Act, Section 2 (52) CGST Act, defines Goods as follows goods means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply - the business is not Goods for it is not a movable property and thereby Transfer of Business cannot be supply of goods. On going through the definition of Service, Section 2(102) CGST Act, which defines Service as follows services means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged - Business may be covered under the umbrella of the definition of Service, in accordance to Section 2(102) CGST Act and the activity of transfer of business is in the nature of supply. Whether the transfer of business by Airports Authority of India to M/s. Adani Jaipur International Airport Limited is treated as supply as going concern and covered in clause 4 of schedule II of CGST Act viz-a-viz RGST? - HELD THAT - As per Article 16.2 and 16.3 of the agreement, the SPV shall assume control of all Aeronautical Assets, Non Aeronautical assets and Terminal Building on the commercial operation date hereinafter referred as 'COD' . Further, we find that as per Article 16.1.1 of the agreement, all revenues, receipts, expenditure and other financial transactions for and in respect of the Airport shall be deemed to be transferred from the AAI to SPV on COD and all rights, obligations and liabilities in respect thereof shall vest exclusively in the SPV until the transfer date - it is not essential to transfer all assets and liabilities against a transaction to qualify for a 'transfer of business. That is to say that even if some assets are retained by the AAI, and the SPV after such takeover carries out subject business activities without any obstruction then it shall qualify to be a transfer of a business. As per Article 16.1.1 of the Agreement, all the liabilities incurred by the AAI prior to commercial operation date including any debt obligations and payments to AAI or any third party shall continue to vest in AAI at all times - the business arrangement between AAI and SPV vide Concession Agreement dated 16.01.2021 is squarely covered under transfer of going concern. Whether the transfer of business by Airports Authority of India to M/s. Adani Jaipur International Airport Limited is covered in clause 4 of schedule II of CGST Act viz-a-viz RSGST? - HELD THAT - Concession Agreement dated 16.01.2021, AAI has only transferred its Jaipur Airport business to the M/s AJAIL (SPV) but its other business are not transferred AAI through this Concession Agreement, hence AIA has not ceased to be a Taxable person and for other business the AAI is a taxable person and registered under GST - Schedule II (4) CGST Act stipulates whether the transactions with respect to 'Transfer of Business Assets' to be treated as supply of Goods or supply of services. Having gone through the subject Contract, we find the subject business arrangement is 'transfer of going concern'. As such, there are no merit to vivisect the subject Contract and examine the treatment of aeronautical assets/ non aeronautical assets/ other business assets in the Contract entered between AAI and SPV - the transfer of business by Airports Authority of India to M/s AJAIL (SPV) is transfer of a 'going concern' and the same is not covered in clause 4 of schedule II of CGST Act. Whether the transfer of business by M/s. Airports Authority of India to M/s. Adani Jaipur International Airport Limited is covered under the Entry No. 2 of the exemption notification No 12/2017 Central Tax (Rate) dated 28-06-2017? - HELD THAT - In exercise of powers conferred under Section 11(1) CGST Act, the Central Government has issued Notification 12/2017-CT(R) dated 28-6-2017, wherein at serial no. 2 of said Notification, reads the description of service as 'Services by way of transfer of a going concern, as a whole or an independent part thereof'. The transfer of business is service thus, 'services by way of transfer of a going concern,' is 'Transfer of a going concern service' - business is service and transfer of a going concern is supply of service. Whether the concession fees paid by M/s. Adani Jaipur International Airport Limited to M/s. Airports Authority of India be treated as consideration for transfer of business? - HELD THAT - Consideration for Services by way of transfer of a going concern may be as per the terms and conditions of the Contract and there is no restriction on consideration being upfront/ one time/ in installments. Concession fees is payable by SPV to AAI during the concession period, calculated on a formula based on passenger footfall. The same is part of consideration for transfer of business assets. Whether GST is applicable on Monthly/Annual concession fees charged by the Applicant on the M/s. Adani Jaipur International Airport Limited? If yes at what rate? - HELD THAT - The monthly/annual concession fees is also part of consideration for Services by way of transfer of a going concern and exempted from GST vide entry no. 2 of Notification No. 12/2017-CT dated 28.06.2017. Whether GST is leviable on the invoice raised by the Applicant for reimbursement of the salary/ staff cost on M/s. Adani Jaipur International Airport Limited? If yes at what rate? - HELD THAT - The points of agreements that payment of salary or emoluments of staff is onus of applicant i.e. AAI. The M/s. Adani Jaipur International Airport Limited (SPV) from paying emoluments to the manpower which is engaged in providing their services in operation of the airport and this manpower can demand or and will receive their emoluments from the AAI only. Further, AAI will receive interest on delayed payment of reimbursement - in light of condition the emoluments received by the AAI form a part of services by transfer of outgoing concern, it seems the supply of manpower services by AAI to the M/s. Adani Jaipur International Airport Limited (SPV). Thus, it is clear that the employees of AAI may opt or may not opt for employment under the SPV and there may be circumstances in which they do not receive employment offers or they continue their services with the AAI and in this condition they will be redeployed by the AAI and removed from the airport which will be managed and operated by the SPV. Thus there is no case for exemption on the reimbursement of emolument of employees to the AAI as services of manpower supply is provided by one distinct entity to another distinct entity where transfer of business as a going concern is not a precondition nor this supply of manpower services is a corollary to the agreement for transfer by outgoing concern for the operations management and development of the airport - the invoice raised by the Applicant for reimbursement of the salary/ staff cost on M/s. Adani Jaipur International Airport Limited is falls is a consideration for supply which falls under the ambit of manpower service and hence taxable @ 18%. not for supply of transfer of business as a going concern. Reimbursement of municipal tax, property tax and water charges - HELD THAT - The reimbursement of municipal tax, property tax and water charges has occur in light of the terms of Concession Agreement dated 16.01.2021 and falls under the Supply of Transfer of Going concern Service', which is exempt from GST. Reversal of ITC under section 17 (2) / (3) of CGST Act viz-a-viz RGST Act - HELD THAT - AAI is providing services by way of transfer of a as a going concern which is exempt supply in light of Sl.No. 2 of Notification 12/2017 of CGST Act 2017 Further, as per sec. 17 read with rule 42 of CGST Rules, 2017, in case any registered person is having any exempted supplies, then ITC pertaining to such exempted supplies shall be reversed proportionately.
Issues Involved:
1. Whether the transfer of business by the Airport Authority of India (AAI) to M/s. Adani Jaipur International Airport Limited (AJIAL) qualifies as a "Supply" under Section 7 of the CGST Act, 2017. 2. Whether the transfer of business is treated as a supply of a going concern and covered under clause 4 of Schedule II of the CGST Act. 3. Whether the transfer of business is covered under Entry No. 2 of the exemption notification No. 12/2017 - Central Tax (Rate) dated 28-06-2017. 4. GST implications on the transfer of existing assets, aeronautical assets, non-aeronautical assets, and capital work in progress. 5. Classification of the transfer of assets as services. 6. Treatment of concession fees paid by AJIAL to AAI. 7. GST applicability on monthly/annual concession fees. 8. GST applicability on reimbursement of salary/staff costs. 9. GST applicability on reimbursement of municipal tax, property tax, and water charges. 10. Reversal requirements under Section 17(2)/(3) of the CGST Act. Summary: 1. Transfer of Business as Supply: The Authority ruled that the transfer of business by AAI to AJIAL qualifies as "Supply" under Section 7 of the CGST Act, 2017. The definition of supply includes transfer, and the activity of transferring business fits within this definition. Business, as defined under Section 2(17)(d) of the CGST Act, includes the supply or acquisition of goods and services in connection with the commencement or closure of business. 2. Supply as a Going Concern: The transfer of business is treated as a supply of a going concern and is not covered under clause 4 of Schedule II of the CGST Act. The business arrangement between AAI and AJIAL meets the criteria of a going concern, which includes the continuity of business for a foreseeable period, no intention to liquidate, and the capability to run independently. 3. Exemption under Notification No. 12/2017: The transfer of business by AAI to AJIAL is covered under Entry No. 2 of the exemption notification No. 12/2017 - Central Tax (Rate) dated 28-06-2017. This entry exempts services by way of transfer of a going concern, as a whole or an independent part thereof. 4. GST on Transfer of Assets: Since the transfer of business qualifies as a transfer of a going concern, there is no need to separately address the GST implications on the transfer of existing assets, aeronautical assets, non-aeronautical assets, and capital work in progress. 5. Classification of Transfer of Assets: The classification of the transfer of assets as services is not required as the transfer of business as a going concern is already covered under the exemption notification. 6. Concession Fees as Consideration: The concession fees paid by AJIAL to AAI are treated as consideration for the transfer of business. 7. GST on Concession Fees: The monthly/annual concession fees are part of the consideration for the transfer of a going concern and are exempt from GST under Entry No. 2 of Notification No. 12/2017-CT(R) dated 28-06-2017. 8. GST on Reimbursement of Salary/Staff Costs: GST is leviable on the invoice raised by AAI for reimbursement of salary/staff costs to AJIAL at the rate of 18% (9% CGST and 9% SGST). The reimbursement of emoluments to AAI does not form part of the transfer of business as a going concern and is considered a supply of manpower services. 9. GST on Reimbursement of Municipal Tax, Property Tax, and Water Charges: The reimbursement of municipal tax, property tax, and water charges falls under the supply of transfer of a going concern service and is exempt from GST. 10. Reversal of ITC: AAI is required to reverse the ITC proportionate to the exempt supply of services by way of transfer of a going concern as per Section 17(2)/(3) of the CGST Act. Ruling: 1. The transfer of business is a supply under Section 7 of the CGST Act. 2. The transfer is a supply of a going concern and not covered under clause 4 of Schedule II of the CGST Act. 3. The transfer is covered under Entry No. 2 of Notification No. 12/2017-CT(R). 4. No separate ruling required for GST on transfer of assets. 5. No separate ruling required for classification of transfer of assets. 6. Concession fees are part of the consideration for the transfer of business. 7. Monthly/annual concession fees are exempt from GST. 8. GST at 18% is applicable on reimbursement of salary/staff costs. 9. No GST on reimbursement of municipal tax, property tax, and water charges. 10. Reversal of ITC is required as per Section 17(2)/(3) of the CGST Act.
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