2019 (4) TMI 1499 - AAR - GST

Levy of GST - Business Transfer Agreement as a going concern on slump sale basis - serial no. 2 of the Notification No. 12/2017-CentraI Tax (Rate) dated 28.06.2017 - HELD THAT - On perusal of serial no. 2 of the said notification, it is found that the services by way of transfer of a going concern, as a whole or an independent part thereof is to be treated as supply of service and covered under chapter 99 of the Service Code (Tariff) and is exempted from GST. The applicant is carrying on the business of manufacturing of textile yarns, fabrics and garments across India and one of them is situated at B-8, Phase-I, SIDCUL Industrial Park, Sitarganj, Udham Singh Nagar, Uttrakhand and on perusal of the agreement, it is found that the applicant has intends to sale the ongoing Sitarganj business along with its all assets liabilities and the said Sitarganj business is live/operating. The purchaser has purchased the Sitarganj business to carry on the same kind of business. Further as on date it is found that there is no series of immediately consecutive transfers of the said business. The applicant has supplied services by way of transfer of Sitarganj Business as a going concern, and as per serial no. 2 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, the same is exempted from levy of GST as on date.

Summary

Issues:
1. Interpretation of whether "Business Transfer Agreement" as a going concern on slump sale basis is exempt from GST under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

Analysis:
The ruling was sought by M/s Innovative Textile Limited regarding the exemption of GST on a "Business Transfer Agreement" under the mentioned notification. The application was admitted under Section 97(2)(b) of the Act. The applicant, a textile manufacturer, intended to transfer their business to M/s. S.D. Polytech (P) Ltd on a slump sale basis. The applicant claimed exemption based on the notification and cited a previous ruling in support.

The Authority examined the definition of "business" under Section 2(17) of the Act, which includes various activities related to trade, commerce, and services. The term "going concern" implies a live or operating business with all necessary features to keep it operational. International guidelines were referenced to determine the criteria for treating a transfer as a going concern, emphasizing the continuity of business operations and the intention of the purchaser to continue the same business.

The Authority reviewed the specifics of the Business Transfer Agreement, noting the inclusion of assets, liabilities, and the ongoing nature of the business being transferred. It was observed that the applicant's business in Sitarganj was operational, and the transfer was to enable the purchaser to continue the same business. The absence of consecutive transfers further supported the conclusion that the transfer qualified as a going concern.

Based on the analysis, the Authority ruled that the transfer of the Sitarganj Business qualified as a going concern and was exempt from GST under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The ruling highlighted the specific circumstances of the case and the applicability of the exemption provision to the transaction at hand.