2020 (7) TMI 345 - AAR - GST

Classification of Supply - transfer (sale) of ongoing business / unit - supply of goods or supply of services or supply of goods services - Research Development work in Active Pharmaceutical Ingredient (API) formulation molecules manufacture of formulation products in small quantity for R D purpose - SI.No.2 of the Notification No. 12/2017-Central Tax (Rate) dated 28.6.2017 - transfer of unutilized credit - HELD THAT - In the instant case the activity of the transfer is made for a consideration, but neither in the course of the business nor for the furtherance of the business. A going concern is a onetime affair made where the business is sold including assets in entirety or an independent part thereof. Even though this transaction does not amount to a supply as per definition, but qualified to be one under the scope of supply as it is backed by the term includes in Section 7(1) of the CGST Act, 2017. Thus, in the broadened interpretation of the term includes , this activity is brought under the scope of supply. Whether ongoing concern is to be treated as supply of goods or supply of services ? - HELD THAT - The definition of services qualifies anything other than goods as service. In this context it is obvious that the going concern , which was excluded form list of supply of goods as discussed above, would automatically fall under supply of services - Further, the description of services under SI.No.2 of Chapter 99 of Notification No. 12/2017 - Central Tax (Rate) dated 28.6.2017 provides for Services by way of transfer of a going concern, as a whole or an independent part thereof as nil rated. Hence, the transaction is not liable to tax. Whether the applicant can file GST ITC-02 return and transfer unutilised ITC from Vizianagaram, Andhra Pradesh unit to Bengaluru, Karnataka Unit? - HELD THAT - In case of sale or transfer, the transferor can transfer unutilised input tax credit to the transferee, which is lying in his electronic credit ledger, by filing Form GST ITC-02. The transaction would amount to supply of services - the transaction would cover SI.No.2 of the Notification No.12/2017- Central Tax (Rate) dated 28.6.2017 - the unutilised ITC from Vizianagaram, Andhra Pradesh unit to Bengaluru, Karnataka Unit can be transferred by filing GST ITC-02.

Summary

Issues:
1. Classification of transaction as supply of goods, supply of services, or supply of goods & services.
2. Applicability of Notification No.12/2017-Central Tax (Rate) dated 28.6.2017.
3. Transfer of unutilized Input Tax Credit (ITC) from one unit to another.

Classification of Transaction:
The case involved the transfer of a business unit from Andhra Pradesh to Karnataka for a monetary consideration. The Authority analyzed whether this transaction constituted a supply of goods, services, or both. The applicant's business transfer was considered a one-time affair, falling under the broadened interpretation of 'supply' as per Section 7(1) of the CGST Act, 2017. The transfer of the going concern was deemed to be a supply of services as per the definition provided under Section 2(102) of the Act.

Applicability of Notification No.12/2017:
The applicant sought clarification on whether the transfer of capital assets would cover SI.No.2 of Notification No.12/2017-Central Tax (Rate) dated 28.6.2017. The Authority affirmed that the transfer of the going concern, as a whole or in part, qualified as a service under the said notification and was nil-rated for tax purposes.

Transfer of Unutilized ITC:
Regarding the transfer of unutilized Input Tax Credit (ITC) from the Andhra Pradesh unit to the Karnataka unit, the Authority referred to Section 18(3) of the CGST Act, 2017, and Rule 41 of the CGST Rules. It was established that in the event of a business transfer, the transferor could transfer unutilized ITC to the transferee by filing Form GST ITC-02. The ruling affirmed the applicant's ability to file GST ITC-02 return and transfer unutilized ITC from the Andhra Pradesh unit to the Karnataka unit.

In conclusion, the Authority ruled that the transaction amounted to a supply of services, covered SI.No.2 of the Notification No.12/2017, and allowed the transfer of unutilized ITC from one unit to another. The detailed analysis provided clarity on the legal aspects and implications of the issues raised before the Authority.