2021 (4) TMI 838 - AAR - GST

Partnership firm withdraws GST goodwill clarification application without authority observations.

In Re: M/s. Shiv Sankara Health Care Enterprises

The application seeking clarification on whether the goodwill paid to retiring partners is subject to GST was withdrawn by the applicant partnership firm. ... Permission for withdrawal of application - Taxability under GST - Goodwill paid to retiring partners - HELD THAT:- The applicant vide their submissions had not provided the details as to how the goodwill was arrived and the details of financial accounts of 'Goodwill Account' for 18-19 & 19-20, which are necessary to ascertain the liability to GST. The issue on the applicability of GST on the 'Goodwill' extended by the applicant to the retiring partners can be arrived at only after analyzing the details as to how the goodwill was arrived at and the related accounts which have not been furnished by the applicant. The applicant for the reasons that their consultants are not available has requested for withdrawal of the application - the withdrawal is to be permitted as the issue cannot be decided based on the submissions made by the applicant. Therefore, withdrawal is permitted without offering any observation comment on the admissibility of the application under Section 97(2) of the TNGST/CGST Act 2017 and the applicability of the GST on the 'Goodwill'. The application filed by the applicant seeking advance ruling is disposed as withdrawn. Issues Involved:1. Whether the goodwill paid to the partners at the time of retirement is liable to be taxed under the GST Act.Issue-wise Detailed Analysis:1. Goodwill Paid to Retiring Partners and GST Liability:- Applicant’s Submission:The applicant, a partnership firm, sought clarification on whether the goodwill paid to retiring partners is subject to GST. They argued that the goodwill amounting to Rs. 1,15,04,000/- paid to the retiring partners cannot be considered a 'supply' under Section 7 of the CGST Act, as it does not constitute a transaction 'in the course of or for the furtherance of business.' They further contended that goodwill is not listed in any GST Act schedules and is an intangible asset eligible for depreciation under the Income Tax Act, but not an 'asset' as per section 45 of the IT Act, 1961. They cited the case of CIT vs. R. Lingamallu Rajkumar [247 ITR 801] to support their view that the amount paid upon retirement does not involve a transfer within the meaning of section 2(47) and is not chargeable to income tax.- Jurisdictional Authorities' Comments:The State Jurisdictional officer confirmed no pending adjudication or demand against the applicant. The Centre Jurisdictional authority commented that goodwill, an intangible asset, is paid to retiring partners for giving up their rights in the firm's existing goodwill and fixed assets. They stated that as per Section 2(52) and Section 2(102) of the CGST Act, 2017, goodwill falls under the definition of 'goods' and 'services' respectively. Section 7(a) of the CGST Act includes such transactions as taxable supplies. The Centre authority concluded that the goodwill amount is a taxable supply under CGST Act, and the tax should be paid by the retiring partners, not the continuing partners.- Hearing and Submission:The applicant appeared for hearings and submitted various documents, including partnership deeds, retirement deeds, and proof of payment to retiring partners. They reiterated their stance that the goodwill payment is not taxable under GST and requested further hearings to submit additional documents. However, due to the COVID-19 pandemic and the unavailability of their consultant, the applicant requested to withdraw the application.Ruling:The authority permitted the withdrawal of the application without offering any observations or comments on the admissibility of the application under Section 97(2) of the TNGST/CGST Act 2017 and the applicability of GST on the 'Goodwill.'Conclusion:The application filed by the applicant seeking advance ruling was disposed of as withdrawn.