Transfer of business between two GST registrations of same PAN holder constitutes supply under Schedule I

The AAR Maharashtra held that transfer of business by way of merger between two GST registrations of the same PAN holder constitutes supply under GST law per Schedule I of CGST Act, 2017, as it involves distinct persons. However, the transaction qualifies only as supply of goods, not services, since both units hold the same PAN and are merely distinct persons rather than constituting transfer of business as going concern to another person. The provisions of Para 4(c) of Schedule II CGST Act do not apply. Questions regarding merger qualification and credit transfer were not admitted under Section 97 provisions.

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Issues Involved:

1. Whether the transaction of transfer of business by way of merger of two GST registrations/distinct persons would constitute 'supply' under the GST lawRs.
2. Whether the transaction of transfer of business by way of merger of two GST registrations/distinct persons would constitute 'supply of goods' under the GST lawRs.
3. Whether merger between distinct persons would qualify as 'transfer of business as going concern' under the purview of GST LawRs.
4. Whether the transaction of transfer of business by way of merger of two GST registrations/distinct persons would constitute 'supply of services' under the GST lawRs.
5. If the transaction qualifies as 'supply of services', whether the said transaction would get covered under SI. No. 2 of Notification no. 12/2017-C.T. (R) dated 28.06.2017, and therefore not liable to GSTRs.
6. Whether Nagpur registration can file Form GST ITC-02 and transfer unutilized credit balance to Akola registrationRs.
7. In case the Applicant merges the business of Akola registration, then can the Applicant claim credit balance appearing in Akola registration via Form GST ITC 02A in Nagpur registrationRs.

Detailed Analysis:

Issue 1: Supply under GST Law

The Authority confirmed that the transaction of transfer of business by way of merger of two GST registrations/distinct persons constitutes 'supply' under the GST law. This is based on Section 7(1) of the CGST Act, 2017, which includes all forms of supply of goods or services or both, such as sale, transfer, barter, exchange, license, lease, rental, or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. Moreover, Schedule I of the CGST Act specifies that supply between related persons or distinct persons is treated as supply even if made without consideration.

Issue 2: Supply of Goods

The Authority determined that the transaction constitutes 'supply of goods' under the GST law. This conclusion is based on the provisions of Section 7(1A) of the amended CGST Act 2017 and Part 4(c) of Schedule II, which states that the transfer of business as a going concern does not amount to the supply of goods. However, since the transaction is between distinct persons holding the same PAN, it does not qualify as a transfer of business as a going concern to another person.

Issue 3: Transfer of Business as Going Concern

This issue was not answered as it is not covered under the provisions of Section 97 of the CGST Act, 2017.

Issue 4: Supply of Services

The Authority concluded that the transaction does not constitute 'supply of services' under the GST law. The reasoning is that since the transfer of business on a going concern basis does not constitute the supply of goods, it should be treated as the supply of services. However, the transaction between distinct persons holding the same PAN does not qualify as a transfer of business as a going concern to another person.

Issue 5: Exemption under Notification No. 12/2017-C.T. (R)

This issue was not answered because the transaction does not qualify as the supply of services, as determined in Issue 4.

Issue 6: Transfer of Unutilized Credit Balance

The Authority answered in the negative, stating that Nagpur registration cannot file Form GST ITC-02 to transfer the unutilized credit balance to Akola registration. This conclusion is based on the interpretation of Section 18(3) of the CGST Act, 2017, which allows the transfer of input tax credit only when there is a change in the constitution of the registered person on account of sale, merger, demerger, amalgamation, lease, or transfer of the business.

Issue 7: Claiming Credit Balance via Form GST ITC 02A

This question was not admitted at the time of the application and therefore was not answered.

Conclusion:

The Authority concluded that the transaction of transfer of business by way of merger of two GST registrations/distinct persons constitutes 'supply' and 'supply of goods' under the GST law but does not constitute 'supply of services.' Consequently, the transaction is not exempt under Notification No. 12/2017-C.T. (R). Additionally, the transfer of unutilized credit balance via Form GST ITC-02 is not permissible.

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