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TMI Blog2023 (4) TMI 959X X X X Extracts X X X X X X X X Extracts X X X X ..... licant 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 wate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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. * As per Chapter III, Section 12 (1) & (2) of AAI Act, the functions of the AAI are: • To manage the airports, the civil enclaves and the aeronautical communication stations efficiently; • To provide air traffic service and air transport service at any airport. * AAI may undertake various activities specified in Section 12 (3) of AAI Act, as required from time to time to achieve the above objective such as: • Plan, develop, construct and maintain runways, taxiways, aprons and terminals and ancillary buildings at the airports and civil enclaves; • Establish airports or assist in the establishment of private airports by rendering such technical, financial or other assistance which the Central Government may consider necessary for such purpose; • Plan, procure, install and maintain navigational aids, communication equipment, beacons and ground aids at the airports and at such locations as may be considered necessary for safe navigation and operation of aircrafts; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rprise and professionalism and to harness necessary investment. Airport has been defined in Article 1 clause 1.1 of the concession agreement. For reference the definition of airport is defined as under: "Airport" means Jaipur International Airport located at the Site, and includes civil, mechanical and electrical works, the Terminal Building, Cargo Facilities, Runway and all Project Assets necessary for and associated with operation and expansion of the Airport; * After evaluation of the bids received from the bidders and receipt of approval of GOI the applicant accepted the bid of Adani Enterprise Limited and issued letter of Award dated 01.09.2020 which required Adani Enterprise Limited to execute the concession agreement through a special purpose vehicle. * Adani Enterprise Limited has promoted and incorporated a special purpose vehicle as Adani Jaipur International Airport Limited (herein after referred as Concessionaire) under Companies Act 2013 and in accordance with the terms of Request for proposal (REP). * After receipt of security clearance from Ministry of Home Affairs, GOI through MOCA, Applicant has accepted the request of the concessionaire and entered into a ..... 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Aeronautical Assets; (c) tangible assets such as civil works and equipment including foundations, drainage works, electrical systems, communication systems and administrative offices; (d) Project Facilities situated on the Site; (e) buildings and immovable fixtures or structures forming part of City Side Development; (f) all rights of the Concessionaire under the Project Agreements; (g) financial assets, such as receivables, security deposits, all negotiable instruments etc; (h) insurance proceeds; and (i) Applicable Permits and authorizations relating to or in respect of the Airport; * In nutshell the whole airport operations which were run by the applicant would be given to the Concessionaire for the period of 50 years for agreed consideration. * Concessionaire agrees to pay the Applicant (i.e. Airports Authority of India) following sum as consideration for transfer: - • Rs. 2,53,00,00,000/- towards Estimated Deemed Initial Regulatory Asset Base (RAB) i.e. estimated depreciated value of Investments made by the Applicant in the Aeronautical Assets at the airport as on 31st March 2018. (As per Clause 28.11.3 of the Concession Agreement, which is subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upplies of goods or services. Similarly, State Goods and Service Tax ('SGST'), is also leviable on intra-state supplies of goods and services. * As per Section 5 of the IGST Act, which is the charging section, integrated Goods and Services Tax ('IGST') shall be levied on all inter-state supplies of goods or services or both. * Thus, it is clear that GST is leviable on supply of goods or services. Thus, it is imperative to analyses whether the transfer of business qualifies as 'supply'. The term 'supply' has been defined in section 7 of CGST Act. Section 7 of the Act is reproduced hereunder: * 7. (1) for the purposes of this Act, the expression supply includes- * (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; * (aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration. Explanation.- For the purposes of this clause, it is hereby clarified t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, to be called as goods, it has to be movable property. As business cannot be said to be movable, transfer of business cannot be said to be a transfer of goods. Subsequently the next question arises is whether the transfer of business will come under the purview of definition of services. Section 2 (102) of the CGST Act defines 'services' as: '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. As per the definition of services, anything other than goods is called a service. Therefore, the above transaction of transfer of business will be supply of services. * It is worth noting that Section 7(1A) of the CGST Act provides a reference to Schedule II of the CGST Act which provides for the classification of the underlying transaction/activity i.e. whether it qualifies as goods or services. However, Schedule II is silent on the transaction undertaken by the applicant. * However, in Sr. No. 2 of the Notification No. 12/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le but the exemption notification does not refer to sale of going concern to be exempted. It uses the word 'transfer'. Given that there is no definition of 'transfer', two views are possible. The first view is that it could mean an outright sale. The second view could be that it may not necessarily mean outright sale because if the intention of the legislature was to exempt sale of going concern, it could have used the term sale. However, it has used the word transfer of going concern to be an exempt transaction. * In the present case, there is transfer of business of operating, managing and developing of the airport for a period of 50 years as per clause 3.1.1 of the concession agreement. The rights of the concessionaire shall lapse after the said period and will be transferred back to the applicant as mentioned in clause 36.1 of the agreement. Hence, it can be said that there is temporary transfer of business. * However, in exemption entry 2 of the Notification No. 12/2017 -Central Tax (Rate) dated 28 June 2017; there is no specific mention to cover only permanent transfer. Hence, it can be concluded that even temporary transfers are covered in the said entry. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot restricted to permanent transfer. The various definitions of the term transfer are summarized below for ready reference: Arms Act. 1959 Section 2(lXk) Transfer with its grammatical variations and cognate expressions, includes letting on hire, lending, giving and parting with possession. Foreign Exchange Management Act 1999 Section 2(za) Transfer includes sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien. Prevention of Money Laundering Act, 2003 Section 2(za) Transfer includes sale, purchase, mortgage, pledge, gift, loan or any other forms of transfer of right, title, possession or lien. There have been instances where the Courts have interpreted the term 'transfer' to include the meaning of temporary transfer, such as; a. Reference can be made from 20th Century Finance Corpn. Ltd. v. State of Maharashtra, (2000) 6 SCC 12 In Corpus Juris Secundum [Vol. 87, p. 892.], it is defined to mean, Common use of the word transfer is, to denote the passing of title in property or an interest therein from one person to another and in that sense the term means that the owner of the property de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness is live or operating and has all parts and features necessary to keep it in operation. Transfer of a going concern means transfer of a running business which is capable of being carried on by the purchaser as an independent business. Such transfer of business as a whole will comprise comprehensive transfer of immovable property, goods and transfer of unexecuted orders, employees, goodwill etc. It implies that the business will continue in the new hands with regularity and a nature of permanency. In the present case, the above test is satisfied because, even after transfer, concessionaire will be in position to manage, operate airport and undertake the functions as were undertaken by applicant. Moreover, there will not be any interruption in the operations of the airport on account of the underlying transaction. Hence, it can be said that there is a going concern. The clause 16.1.1 of the concession agreement specifies as under: "All revenues, receipts, expenditure and other financial transactions for and in respect of the airport shall be deemed to be transferred from the authority to the concessionaire with effect from 0000 (zero zero zero zero) hours on COD and all rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws and the Applicable permits, the authority hereby grants to the concessionaire, the concession set forth herein including the exclusive right, lease and authority to operate, manage and develop the Airport (Concession) for the period of 50 (fifty) years commencing from the COD, and the concessionaire hereby accepts the Concession and agrees to implement the project subject to and in accordance with the terms and conditions set forth herein. 3.1.2. Subject to and in accordance with the provisions of this agreement, the authority, applicable laws and the applicable permits, the concessionaire hereby granted shall oblige or entitle (as the case may be) the concessionaire to: a) the Right of Way, access and lease to the Site for the purpose of and to the extent conferred by the provisions of this Agreement; b) finance the development and expansion of the Airport; c) Operate, maintain and manage the Airport and regulate the use thereof by third parties; d) demand, collect and appropriate Fee from Users liable for payment of Fee for using the Airport or any part thereof and refuse entry of any such User if the Fee due is not paid; e) perform and fulfil all of the SPV's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uture. Hence it is clear that the underlying transaction involves transaction relating to a going concern for a foreseeable future. * Now the third question arises is whether the transfer is a whole or an independent part thereof. In the present case the applicant is not transferring the entire business, however the applicant is transferring its independent unit i.e. Jaipur International airport. Hence, it becomes necessary to determine whether operation of the airport can be said to be independent part of a going concern of the AAI. * The Jaipur airport of the applicant is the independent part of the applicant. However, rights to operate manage and maintain the airport will be transferred. The word 'independent' in common parlance denotes the stand alone or capable of being functional individually. The concept of business is changing, and new age business undertaking may contain various different businesses and a single business out of the entire business undertaking may contain different units. In such scenario, even transfer of a unit can be said to be transfer of independent part of business In the present case, we understand that the Airport is capable of oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice; project facilities situated on the site; buildings and immovable fixtures or structures forming part of city side development; all rights of the concessionaire under the project agreements; financial assets such as receivables, security deposits , all negotiable instruments etc; insurance proceeds; applicable permits and authorizations relating to or in respect of the airport. The Contract is self-contained to ensure that Airport business continues without hindrances. Therefore, the Contract entered between AAI and SPV is for Transfer of Going concern of an independent part of the business carried out by AAI with respect to the Operations, development and maintenance of the subject Airport. The applicant relies on following pronouncements: i. The Karnatka Authority for Advance Ruling in case of M/s Rajashri Foods Pvt. Ltd. (Karnataka AAR), held that "the activity of transfer of a going concern constitutes a supply of service. The ruling further held that the transaction of transfer of one of the units of the Applicant as a going concern is covered under Sr. No.2 of the Notification No. 12/2017 Central Tax (Rate) dated June 28, subject to the condition that the unit is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of airport from first person to second and subsequently from second person to first amounts to transfer of business by one person to another as a going concern. b. In case of Robinson Family Limited vs. the Commissioners for Her Majesty's Revenue and Customs [2012] UKFTT 360 GC), Hon'ble United Kingdom First Tier Tribunal has held that transfer of property by way of lease for the letting business amounts to transfer of a going concern. * Therefore, the applicant submits that a view can be taken that the transaction amounts to services by way of transfer of a going concern, as a whole or an independent part thereof which is covered in the entry 2 of the exemption Notification No. 1212017-Central Tax (Rate) dated 28 June 2017. * As per the concessionaire agreement, apart from a lump sum consideration, monthly concession charges would also be paid by the Company to AAI. Thus it can regarded that the entire arrangement as one and covered within the meaning of transfer of going concern and thus exempted. * Monthly/ annual concession fees paid by the concessionaire to the Applicant consideration for granting lease right of land, building and the immovable assets. * Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der: "49. Taxes on Land and Buildings" * Applicant is of the view that a long term lease for a period exceeding 30 years tantamount to Sale of the immovable property since the lessor is deprived of the right to use, enjoy and possess the property once the said lease has been granted. * Further attention is also drawn to Article 30 of the Gujarat Stamp Duty Act wherein the aforesaid transaction is treated as conveyance. * Applicant draws your attention to the decision of the Hon'ble Bombay High Court in the case of Navi Mumbai Builder's Association v. Union of India, 53 GSTR 374, which is held as under: 14. On a plain reading of the GST Act, the argument of the assessee is not agreeable. The assessee also relies upon Schedule II, which is referable to section 7. These are the activities to be treated as supply of goods or services. The substantive provision section 7 in clearest terms says that the activities specified in Schedule I made or agreed to be made without a consideration and the activities to be treated as supply of goods or supply of services referred to in Schedule II would be included in the expression 'supply'. However, clause [a) of sub-sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * The applicant submits that if the monthly/ annual fees are considered to be consideration for transfer of business over and above the initial/ one time payments then the exemption shall be available and thus Navi Mumbai Builder's Association v. Union of India is distinguishable. * The applicant submits that it receives reimbursement of property tax, water tax, electricity etc payable from the concessionaire. The applicant submits that the said reimbursements are in nature of pure agents and thus cannot be treated as supply under section 7 of the CGST Act. * The applicant also raises invoice for emoluments of various employees of AAI engaged by the concessionaire i.e. Adani Group . The applicant submits that the said invoice is raised to cover the emoluments of the Government employees transferred under the agreement. One of the considerations which concessionaire is liable to bear is for the Authority's Employees. According to clause 6.5.4 of the concession agreement the concessionaire shall bear the Select Employees Cost for Joint Management period and Deemed Deputation period. The concessionaire shall pay on monthly basis the amount as indicated in the invoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct employees had the option to choose whether to join the concessionaire or not. However, the applicant was contractually obligated to pay the salaries and other emoluments to the select employees hired for the purpose of the operations of Jaipur airport. * The applicant has merely passed over its liability arisen out of the employment contracts of the select employees to the concessionaire. And thus this cannot be considered as any damages levied upon the concessionaire. * The applicant submits that the said employees were transferred along with the business. Hence if the transfer of business is treated as transfer as going concern as just exempted vide Entry No. 2 of the exemption notification No 12/2017 - Central Tax [Rate], then said transaction also be covered by the same. In the identical case the Authority for Advance Ruling of Gujarat in the case of Airport Authority of India [2021] 131 taxmann. com 249 held as under: In the identical case the Authority for Advance Ruling of Gujarat in the case of Airport Authority of India[2021] 131 taxmann.com 249 held as under: "The subject issue hinges on whether business arrangement between AAI and SPV is a transfer of going co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be deemed to be the liabilities of the SPV. Further, it is opined that it is not essential to transfer all assets and liabilities for 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 transfer carries out subject business activities without any obstruction, it shall still qualify to be a transfer of a business. iii. Legal backing for Transfer of functions to AAI to SPV It is found that AAI has transferred to SPV the exclusive right and authority to operate, manage and develop the Airport for a period of 50 years commencing from the Commercial Operation Date. iv. Transfer of Employees from AAI to SPV The SPV shall bear the select employees costs, as set forth in the said contract. Further, during the joint management period, the SPV shall make employment offers to a minimum of 60 per cent of select employees and SPV shall be the new employer of the accepting employees on the terms and conditions mutually agreed between SPV and the accepting employees. v. Steps taken for Business Continuity There is a condition of the said contract, that neither AAI nor its affiliates shall c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found that 'transfer of business' is more of an event in pursuance to a business arrangement. [Para 24.6] In exercise of powers conferred under section 11(1], the Central Government has issued Notification No. 12/2017 - Central Tax [Rate], dated 28-6-2017, wherein at SI. No. 2 of Notification No. 12/2017 - Central Tax [Rate], dated 28-6-2017 reads the description of service as 'services by way of transfer of a going concern, as a whole or an independent part thereof. The plain meaning of the words 'services byway of transfer of a going concern,' is 'transfer of a going concern service'. [Para 24.8] SI No. 2 of Notification No. 12/2017 which has been issued in exercise of powers granted by section 11(1), it is held that business is service and transfer of business is supply of service. [Para 24.9] The transfer of business may be by way of sale, gift, lease, leave and license, hire or in any other manner whatsoever. The wording used in the Notification No. 12/2017 is transfer of business and not sale of business. Further, it is held that transfer of business may be as a whole or independent part. [Para 24.10] Thus, subject business arrangement is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the treatment of aeronautical assets/non-aeronautical assets/other business assets in the contract entered between AAI and SPV. The substance of the contract compels one under GST scheme of law interpretation, to classify the subject business arrangement as 'transfer of going concern service'. [Para 26.3] On transferring the said Airport business to SPV, the SPV will cause to continue to successfully operate said business for a foreseeable future. Thus the subject transfer is that of transfer of going concern as an independent part. In this context, there is no merit to examine Schedule 11(4) (c) to the CGST Act as it is limited to the transfer of business assets activity. Such attempt to vivisect the contract renders a myopic view and runs counter to the 'transfer of going concern service' envisages in the substance of the contract. The consideration may be as per the terms and conditions of the contract and there is no restriction on consideration being upfront/one time/in instalments/as per agreed terms of the contract. Concession fees are paid to SPV to AAI during the concession period, calculated on a formula based on passenger footfall. Concession fees pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HE ADVANCE RULING IS SOUGHT:- 1. Whether the transfer of business by the Airport Authority of India to the M/s. Adani Jaipur International Airport Limited be treated as Supply u/s. 7 of the Central Goods and Service Tax Act, 2017 (CGST), viz-a-viz Rajasthan State Goods and Service Tax Act, 2017 (RSGST) ? 2. 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 RSGST? 3. 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. 2of the exemption notification No 12/2017 - Central Tax (Rate) dated 28-06-2017 issued u/s Section 11 of CGST Act 2017? 4. If the answer is negative, then whether GST is leviable 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? 5. Whether the aforesaid transfer of asset be treated as services and the classification for the same? 6. Whether the conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another (b) import of services for a consideration whether or not in the course or furtherance of business, and (c) the activities specified in Schedule I, made or agreed to be made without a consideration, so, according to Section 7 of CGST Act, 2017 the said transfer of business falls under the purview of supply. Q.2. 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 RSGST? Ans.2. Yes, according to the Schedule II of Central Goods and Services Act 2017 -Activities to be treated as supply goods or supply of services where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets. Whether or not for a consideration, such transfer or disposal is a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work in progress by M/s. Airport Authority of India to the M/s. Adani Jaipur International Airport Limited?. Ans. 4. No answer is given. Q.5. Whether the aforesaid transfer of asset is treated as services and the classification for the same? Ans. 5. No. the aforesaid transfer of asset is to be treated as supply of goods. Q.6. 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? Ans.6. Yes, the concession fees paid by M/s Adani Jaipur International Airport Limited to M/s. Airports Authority of India is treated as consideration for transfer of business? Q. 7. Whether GST is applicable on Monthly/Annual concession fees charged by the Applicant on the M/s. Adani Jaipur International Airport Limited? If Yes, What rate? Ans. 7. Yes, 18% Q. 8. Whether GST is leviable on the invoice raised by the Applicant for reimbursement of the salary/ staff cost on M/s. Adani Jaipur Internationa] Airport Limited? If yes at what rate? Ans. 8. Yes, 18% Q.9. Whether GST is applicable on the reimbursement claimed of Municipal tax, Property Tax and Water Charges by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued letter of Award dated 01.09.2020 which required Adani Enterprise Limited to execute the concession agreement through a special purpose vehicle In accordance with and subject to the provisions of the Agreement and applicable laws the applicant has granted Concessionaire the exclusive right, lease and authority to operate, manage and develop the Airport for a period of 50 years commencing from the Commercial Operation Date (a) design, development, financing, construction, upgradation and expansion of the Airport in a phased manner, on the Site and as per the requirements broadly set forth in Schedule A and Schedule B together-with provision of respective project Facilities as specified in schedule B, and in conformity with the specification and standards set forth in Schedule C, and in accordance with the Applicable laws and Applicable permits; (b) operations, maintenance and management of the Airport in accordance with the provisions of this Agreement, Applicable Laws and Applicable permits (c) development, operation and maintenance of city Side, in accordance with the provisions of this Agreement, and, in particular, Schedule A, Schedule B and Schedule C; and (d) perf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nthly Concession Fee as consideration for granting lease right of land, building and the immovable assets, as per Clause 10.2.2 of the Concession Agreement. 3) Now we would like to discuss on questions raised before AAR one by one. 3.1) We observes that applicant has understood by themselves that they have transferred the business to M/s. Adani Jaipur International Airport Limited. The applicant has not put question before appellate authority that whether the business module executed through agreement between M/s. AAI and M/s. ADIAL is transfer of business or not. 3.2) So, we would like to discuss the matter whether the transfer of business as claimed by applicant falls under the ambit of Supply under GST and would be treated as Supply u/s. 7 of the Central Goods and Service Tax Act, 2017 (CGST ) viz-a-viz Rajasthan State Goods and Service Tax Act, 2017. As per Sec. 7(1) of CGST Act, 2017, supply includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made, for a consideration by a person in the course or furtherance of business; As the definition of supply covers transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Airport Limited is treated as supply as going concern and covered in clause 4 of schedule II of CGST Act viz-a-viz RGST. 4.1) The applicant claimed that they have transfer the business to M/s. Adani Jaipur International Airport Limited. Now we would like to examine whether the transaction falls under the supply of going concern. The term 'going concern' is not defined in CGST Act, 2017. From the various available definitions and various ruling pronounced in various judgments i.e. Indor Rama Textile Limited 1 (2013), of Delhi High Court, Allahabad Bank v ARC Holdink [2] (2000) of Supreme Court, AE International Aero Engines AG and Ors. vs. United Breweries (Holdings) Limited and Ors ILR 2017 Karnataka 2225 of Karnataka High Court, We observe that for 'transfer of business of going concern, any agreement must have some contents - (a) business should be continued for a foreseeable period, (b) There is no intention to liquidate the business and there should be continuity of the same business by the transferee as was being carried on by the transferor, (c) Business activity constituted by transfer of assets and liabilities should have capability to run independe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he agreement, the scope of the project shall mean the operations, management and development of the Airport covering- (a] design, development, financing, construction, up-gradation and expansion of the Airport in a phased manner (b) operations, maintenance and management of the Airport in accordance with the provisions of the Agreement, Applicable laws and Applicable Permits; [c] development, operation and maintenance of City side (d) performance and fulfillment of all other obligation of the SPV and matters incidental thereto or necessary for the performance of any or all of the obligations of the SPV under this contract. 4.6] We observes after going through the concession letter dated 16.01.2021, that M/s AAI has transferred the business for operation, management and development of the Jaipur International Airport, Jaipur to SPV (AJIA) for a period of 50 years which establishes that there is continuance of business for the foreseeable future. 4.6] We also find many provisions in the agreement in respect of business continuity such as- [a] The applicant has, submitted that all existing contracts entered by AAI have been novated and the requisite insurance has been ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct business activities without any obstruction then it shall qualify to be a transfer of a business. 4.10) We observe that 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. 4.11) we would like to discuss that if liabilities have not been transferred, even if it compromises the definition of out going concern. 4.12) we observe that it is not necessary for an entity to shift its whole of assets or liability. Here in this case AAI have vast assets but they has transferred Jaipur International Airport through concessional agreement dated 16.01.2021 for the sustainability and continuity of business after transfer of business to SPV. Thus we can reach on conclusion that if any enterprise is having the intention to continue the business even if all assets or liability are not transferred and if only those assets which are essential to continue the business are transferred as an whole or independent part than, it may be treated as going concern. 4.13) we find that the SPV shall bear the Select employees costs, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmediately before he ceases to be a taxable person, unless- (i) the business is transferred as a going concern to another person; or (ii) the business is carried on by a personal representative who is deemed to be a taxable person. 5.1) We find that vide 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. 5.2) We further note that 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, we find 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. 5.3) Thus, we observes that the transfer of business by Airports Authority of India to M/s AJAI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The next question has already discussed in answer of question no 2 & 3. The transfer of asset is part of transfer of going concern as such ruling is not required on the said question. 9.) The next question of the applicant is as to 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? 9.1) We observes 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. 10) The next question of the applicant is as to 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? 10.1) 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find from conditions that the Select Employees may exercise their choice whether they wish to join the new entity or not, and only upon accepting the offer of employment and joining the new entity, they become a part of the transfer of business as a going concern. Moreover only upon accepting the employment offers, they cease to be employees of the AAI and those who do not accept the offer will not be the part of the transfer of going concern. Thus it is ample clear reimbursement of the salary/ staff cost will attract GST as it don't form any part of services by transfer of outgoing concern. 11.5) In light of declarations, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T. Q. 3. 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 issued u/s Section 11 of CGST Act 2017? Ans. 3. The subject Supply is covered at Entry No. 2 of Notification 12/2017-CT(R). Q. 4. If the answer is negative, then whether GST is leviable 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? Ans. 4. Ruling not required, in pursuance to Ruling at serial no 3. Q. 5. Whether the aforesaid transfer of asset be treated as services and the classification for the same? Ans. 5. Ruling not required, in pursuance to Rulings at serial no 2 & 3 Q. 6. 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? Ans. 6. Concession Fee is a part of the Consideration paid by SPV to AAI in subject matter Q. 7. Whether GST is applicable on Mon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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