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TMI Blog2021 (8) TMI 523X X X X Extracts X X X X X X X X Extracts X X X X ..... fter referred to as applicant). 3. Brief Facts of the case: * The applicant, M/s. SCV Sky Vision, is inter alia engaged in cable operation business in and around Tirupati in Chittor District of Andhra Pradesh. * The applicant is a Multi-System Operator ('MSO') and purchases digital signals from broadcasters like E-TV, Star TV Sun TV etc. These signals are transmitted through satellite to receiving stations owned by MSOs. MSOs further transmit these signals through cables to the Local Cable Operators ('LCO') who own their last-mile network to individual homes and customer premises. * As a matter of industry practice, MSO after buying/ receiving the signals of various channels from different broadcasters, turns into a single bouquet or bundle it and transmit to the individual subscribers through various LCOs. * An individual subscriber is required to subscribe to an LCO who would transmit the signals and also install a Set-Top Box ('STB') at home with a viewing card /smart card in it. STBs help MSOs to encrypt the signals for all the channels and transmit them. STBs convert these signals to analogue mode for viewing on televisions sets. * M/s. ACM C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use 6.1); * Applicant will ensure installation of network cables of the purchaser for provision of cable business service and acquisition of customers in the said area and ensure authorization of all broadcasters in ACNs name. (Clause 7.7) * Purchaser will have sole right to decide and collect the subscription fees post transfer of business (clause 7.5) In lieu of the instant business transfer, the purchaser shall pay applicant an aggregate amount of Rs. 12,00,00,000/- on various milestones viz 40% on execution of the BTA and remaining on completion of individual milestones like handing over of customers details, ensuring interconnection of LCOs with purchaser etc. 4. Questions raised before the authority: Whether SI.No.2 of the Notification No.12/2017 - Central Tax (Rate) dated June 28th, 2017 ('Service Exemption Notification') granting exemption to 'Services by way of transfer of a going concern as a whole or an independent part thereof' is applicable on the business transfer undertaken in the present instance? On Verification of basic information of the applicant, it is observed that the applicant falls under Central jurisdiction, i.e. Superintendent, Tir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered under Entry 4(a) of Schedule II. A.3. Further in the case of Deputy Commissioner (CT) v. K. Behanan Thomas, 1977 (39) STC 325 (Madras), the Madras High Court held that transfer of business does not constitute sale of goods. Hence, such supply cannot be said to be supply of goods. A.4. In the case of Paradise Food Court v. State of Telangana, 2017-VIL-238- AP, in the context of VAT Laws, the Andhra Pradesh High Court held that business is not movable property and is therefore not goods. A.5. Accordingly, there are following two supplies in transfer of business:- * Transfer of goods (assets) deemed as supply of goods under Clause 4(a) of Schedule II (supply 1); and * Transfer of business (other than goods) qualifying as supply of service (Supply 2). Supply 1 & Supply 2 qualify as 'Composite Supply' A.6. The applicant submits that Section 2(30) of the CGST Act provides for the concept of composite supply. It stipulates that supply which is made by a person consisting of two or more taxable supplies of goods or services or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the supplies are naturally bundled in the ordinary course of business. A.12. Further, the intent of the applicant is to transfer the entire business. Transfer of goods is only incidental and undertaken to achieve this objective. Hence, it is the transfer of business as a going concern. Hence, the transaction will be deemed as supply of service in terms of section 8 of the CGST Act. A.13. In the present instance, transfer of business of provision and distribution of signals to the subscribers, as a going concern for lump sum consideration, will qualify as supply in accordance with Section 7(1) (a) and 7(1) (d) of the CGST Act. A.14. Further, the intent of ACN is to take over the business of seller. Transfer of goods is only incidental and undertaken to achieve this objective. Hence, transfer of business (service component) will be the principal supply of such composite supply. Hence, the transaction will be deemed as supply of service in terms of Section 8 of the CGST Act. B. Scope of the term 'Going Concern': B.1. The entry as reiterated herein above specifies two criteria which must be met simultaneously. Accordingly, in order to fall under SI.No.2 of service Exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: "The enterprise is normally viewed as a going concern, that is, as continuing in operation for the foreseeable future. It is assumed that the enterprise has neither the intention nor the necessity, of liquidation or of curtailing materially the scale of the operations". B.8. In the present instance, the applicant is transferring all its fixed assets, inventories, customer base, existing LCOs and also supporting in transferring all LCOs through an agreement to ACN. All the rights received from broad casters to the applicant is also being transitioned to ACN which would enable ACN to run the business of provision and distribution of signals through various LCOs without any interruption. B.9. The applicant submits that it retains the existing liabilities and liabilities arising in future due to past relationships and employees due to presence of similar expertise and manpower with the purchaser having been in a similar business. B.10. At this juncture, a question arises as to whether non-transfer of liabilities and employees itself will impact the position of business being transferred as a going concern or whether any transfer of business in a running condition without in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presentatives from, M/s. Nitya Tax Associates, Bengaluru attended and reiterated the submissions which were already made earlier. 7. Discussion and Findings: We have examined the issues raised in the application. The taxability of the goods and services supplied or to be supplied, as governed under the provisions of respective GST Acts are examined to decide the question involved in the present Ruling. The applicant intends to sell his cable network operation business as Multi-System Operator in the present operational condition to the buyer M/s ACN Private Limited, Bengaluru. Further the applicant stated that the business including the assets in the form of Set Top Boxes, Local Cable Operators and the end-users connected thereon get transferred to the buyer except the existing liabilities and liabilities arising out of past business and its employees. The following clauses of the business transfer agreement reveal the same.- * Business' mean entire cable operation business and includes all rights and powers of any nature except any of the employees or liabilities.(Clause 1 2) * Excluded liabilities' to mean all debts, liabilities and obligations relating to the Busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;, then along with the assets of the company, if there are any liabilities relevant to the business or under taking, the liabilities too are transferred. In view of the judicial precedents as mentioned above it is evidently clear that the transaction of 'transfer of business' in the instant case does not fit in the definition of a 'going concern' in the context of exclusion of liabilities. Hence, the entry at serial No.2 of the chapter 99 of the Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 prescribing the rate of tax for 'the services by way of transfer of a going concern as a whole or an independent part there of', as "NIL" rated, is not applicable to the present case. In view of the observations stated above, the following ruling is issued. RULING (Under Section 98 of Central Goods and Services Tax Act, 2017 and the Andhra Pradesh Goods and Services Tax Act, 2017) Question: Whether SI.No.2 of the Notification No.12/2017 - Central Tax (Rate) dated June 28th, 2017 ('Service Exemption Notification') granting exemption to 'Services by way of transfer of a going concern as a whole or an independent part thereof' is applica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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