AAR Karnataka: Transfer of business as a going concern amounts to supply of Service and Exempts From GST

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Applicant having three manufacturing units situated at Ramanagara, Hiriyur and Bengaluru (Seshadripuram) intend to sell the unit situated at Hiruyur along with all its fixed assets namely land, building, plant and machinery etc., current assets namely stock & trade receivable etc. and liabilities namely, bank term loans, bank working capital loans, creditors for supplies etc. for a lumpsum consideration.

Transfer of a going concern means transfer of a running business which is capable of being carried on by purchaser as an independent business. Where applicant had not furnished any documentary evidence to establish that applicant is a going concern except their admission that its an ongoing business and transaction proposes to transfer all assets and liabilities to new owner. It implies that business will continue in new hands with regularity and nature of permanency .

Thus, transaction of transfer of business as a whole of one of units of applicant in nature of going concern amounts to supply of service and is covered  under Sl. No. 2 of the Notification 12/2017-CT(R) subject to the condition that the unit is a going Concern.

Citation: [2018] 93 taxmann.com 417 (AAR-KARNATAKA)