Sale held as transfer of business as going concern; SAC 997119 applies, exempt under Notification No.12/2017-CT (Rate) entry (2)

AAR declined to decide whether the sale constitutes a "slump sale" absent a GST definition, but held the transaction is a transfer of a business as a going concern. The transfer of the specific construction-unit with all assets and liabilities, being the first transfer, falls under SAC 997119 (service of transfer of a going concern) and, though normally taxable at 18%, is exempt under Notification No. 12/2017-CT (Rate) entry (2). Tender obligations for project completion and attendant penalties remain enforceable under the original work order terms.

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ISSUES PRESENTED AND CONSIDERED

1. Whether the proposed transfer of a specific construction-project unit (all assets and liabilities pertaining to that project) qualifies as a "slump sale" for the purposes of GST law.

2. Whether the supply effected by transfer of the business as a going concern (by way of slump sale or otherwise) is classifiable under SAC 997119.

3. Whether a transfer of a going concern (as described above) is exempt from GST under Notification No. 12/2017-Central Tax (Rate) (Entry No. 2 of the Table).

4. Whether any ruling on the above is subject to conditions concerning legal sustainability or consents from other stakeholders bound by project agreements.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Whether the proposed transfer is a "slump sale"

Legal framework: The GST enactments contain no statutory definition of "slump sale"; the term is defined in the Income-Tax law as transfer of one or more undertakings for a lump-sum consideration without assignment of individual values to assets and liabilities.

Precedent treatment: Prior AAR decisions and internationally recognised guidelines (as adopted by an earlier AAR) identify factors relevant to treatment of transfers as "going concern" transactions (e.g. assets sold as part of a business, purchaser's intention to use assets to carry on same business, separability of the part sold, absence of immediately consecutive transfers).

Interpretation and reasoning: The Authority refrains from pronouncing whether the transaction legally qualifies as a "slump sale" under non-GST law because GST statutes do not define the term. The Authority recognises that the transaction, as described, involves transfer of a project unit with a lump-sum consideration, transfer of assets and liabilities and capacity for separate operation - features commonly associated with slump sale in tax/accounting parlance.

Ratio vs. Obiter: The refusal to answer categorically whether the transaction is a "slump sale" is a dispositive approach based on the absence of a GST definition and on limits of the Authority's remit; observations that the transaction has features analogous to slump sale are obiter-style findings of fact relevant to subsequent issues rather than a binding legal determination on the term "slump sale".

Conclusion: The question whether the transaction is a "slump sale" is not answered; however, the transaction is treated as a transfer of a business unit (going concern) for GST analysis.

Issue 2 - Classification under SAC 997119

Legal framework: Schedule II and the classification scheme for services under GST treat "services by way of transfer of a going concern, as a whole or an independent part thereof" as a specified service. Explanatory notes to the services classification and the adopted scheme indicate Financial services codes under Chapter/Group 9971 and related headings.

Precedent treatment: Earlier AAR decisions have classified transfers of a going concern as falling within SAC 997119 (other financial services) and applying the rate of 18% under the relevant notification, subject to any applicable exemptions.

Interpretation and reasoning: The Authority applies the classification approach from prior decisions and the classification scheme to hold that a supply effected by transfer of a going concern-i.e. the described project unit transferred with assets and liabilities-falls under SAC 997119.

Ratio vs. Obiter: The classification of the described supply as SAC 997119 is a ratio decision for the purposes of the questions posed and directly answers Question No. 2.

Conclusion: Supply made as a "going concern" (transfer of the project unit with assets and liabilities) is classifiable under SAC 997119.

Issue 3 - Eligibility for exemption under Notification No. 12/2017-CT (Rate), Entry No. 2

Legal framework: Notification No. 12/2017-CT (Rate) exempts intra-State supply of "services by way of transfer of a going concern, as a whole or an independent part thereof" (Entry No. 2 in the Table) from central tax.

Precedent treatment: Prior AAR reasoning accepts that where a transfer qualifies as a transfer of a going concern, the specified notification provides exemption; prior authorities have applied internationally recognised criteria for determination of going concern status.

Interpretation and reasoning: Applying the going-concern criteria (assets transferred as part of a business, purchaser's intention to carry on same business, separability of the part sold, absence of immediately consecutive transfers) to the facts, the Authority finds that: (a) the applicant intends to transfer the specific project unit with assets and liabilities; (b) the purchaser has authorisation/resolutions to carry on redevelopment; (c) the project unit is capable of separate operation; and (d) there is no series of immediately consecutive transfers. Consequently, a transfer that constitutes a going concern fits within the exemption in Notification No. 12/2017-CT (Rate).

Ratio vs. Obiter: The conclusion that the described transfer is eligible for exemption under Notification No. 12/2017-CT (Rate), Entry No. 2, is a ratio decision directly responsive to the applicant's question.

Conclusion: The applicant is eligible for exemption under Notification No. 12/2017-CT (Rate), Entry No. 2, for the transfer of the project unit treated as a going concern.

Issue 4 - Condition of legal sustainability and stakeholder consents

Legal framework: The contract law and terms of the project agreements (tripartite tender/agreement and principal lease) may impose third-party rights, conditions precedent, or restrictions on assignment/sub-lease; GST rulings may be conditioned on the legal effectiveness of the underpinning transaction.

Precedent treatment: Authorities have conditioned rulings on the legal sustainment of the underlying transaction and on absence of contractual fetters or required consents.

Interpretation and reasoning: The Authority notes multiple stakeholders (municipal corporation and tenement association) bound by the tripartite agreements and the principal lease; no expressed "no objection" or formal consents from those stakeholders were submitted. The Authority therefore qualifies its ruling: the exemption/classification conclusions assume that the sale/transfer agreement is legally sustainable and enforceable in law and that stakeholder rights/consents do not invalidate or alter the nature of the transfer.

Ratio vs. Obiter: The imposition of the condition is part of the operative ruling (ratio) because the legal effect of the GST treatment depends on the validity and effectiveness of the transfer in law.

Conclusion: The classification and exemption rulings are subject to the condition that the agreement/contract of sale is legally sustainable in a court of law and, implicitly, that required consents under project documents or leases are obtained or not violated.

Cross-References and Practical Implications

1. The Authority refrains from defining or labeling the transaction as "slump sale" under GST law (Issue 1) but proceeds to treat the described transfer as a transfer of a going concern for purposes of classification and exemption (Issues 2 & 3).

2. Classification under SAC 997119 (Issue 2) would ordinarily attract an 18% rate, but Notification No. 12/2017-CT (Rate), Entry No. 2, provides an exemption where the transfer genuinely constitutes a going concern (Issue 3); hence both determinations are linked and must be read together.

3. The ruling is conditional (Issue 4): GST treatment depends on the legal validity of the sale/transfer instrument and on compliance with third-party rights and contractual restrictions in the project agreements and lease; absence of stakeholder consents may affect the applicability of the exemption or classification.

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