Applicant's Business Transfer Deemed 'Supply' under GST Act

The judgment concluded that the applicant's direction to transfer businesses qualifies as a 'supply' under the GST Act. The value must be determined per Rule 28 of the CGST Rules, 2017. The question of considering notional consideration as open market value was not specifically answered due to Rule 28's sufficiency.

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Issues Involved:
1. Whether the applicant's direction to the seller for the direct transfer of BP business to MSPL and PM business to MPMPL qualifies as a 'supply' between the applicant and MSPL/MPMPL.
2. If affirmative, whether the applicant must attribute a notional consideration and charge GST in line with Schedule 1 of the GST Act.
3. If affirmative, whether the notional consideration will be considered as open market value given the recipients are eligible for full input tax credit.

Issue-Wise Detailed Analysis:

1. Qualification as 'Supply':
The applicant entered into a Business Transfer Agreement with the seller, Merck Ltd., on 21 June 2018, wherein the seller agreed to transfer BP and PM businesses directly to MSPL and MPMPL, respectively, as directed by the applicant. The applicant's role is central and crucial in directing the seller to transfer these businesses, which is evident from the terms of the agreement. The agreement specifies that the seller can only transfer the business to affiliates as per the applicant's direction. This act of direction by the applicant qualifies as a 'supply' under Section 7(1)(c) of the CGST Act, 2017, as it involves an obligation to do an act under para 5(e) of Schedule II.

2. Notional Consideration and GST Compliance:
Since the direction by the applicant qualifies as a 'supply' and the parties involved (applicant, MSPL, and MPMPL) are related, the absence of actual consideration necessitates attributing a notional consideration. The value of such supply must be determined as per Rule 28 of the CGST Rules, 2017. This rule provides that the value of supply between related persons should be the open market value or, if not available, the value of goods or services of like kind and quality. If these values are not determinable, the value should be determined by the application of Rule 30 or Rule 31 in that order.

3. Notional Consideration as Open Market Value:
The applicant argued that since the recipients (MSPL and MPMPL) are eligible to avail full input tax credit, the notional consideration would be academic, and the invoice value should be considered as the open market value. However, the determination of value as per Rule 28 of the CGST Rules, 2017, suffices, and there is no requirement to specifically answer this question as it would be redundant.

Conclusion:
The judgment concluded that the applicant's direction to the seller for transferring BP and PM businesses to MSPL and MPMPL qualifies as a 'supply' under the GST Act. The value of such supply must be determined as per Rule 28 of the CGST Rules, 2017, and the question of considering the notional consideration as open market value was not specifically answered due to the sufficiency of Rule 28's application.

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