GST on slump sale

[VENKAT S]

GST will attract on slump sale for transfer of business assets. On the other hand, as per the definition of CGST Act supply definition includes all transaction with the exception of the transfer of business as going concern concept. However the transfer of business as a going concern concept is a service as per the provision of CGST Act with the exception that this service is exempt as per the notification.

We kindly request you clarify the same about our understanding on GST

CA S Venkata Subrahmanyam

[Ganeshan Kalyani]

GST is exempt on slump sale.

[Atul Rathod]

Slump sale as going concern would be treated as supply of service and in rate notification for service as going concern is taxed at nil rate. Therefore there is no gst on slump sale.

[KASTURI SETHI]

Yes. Exempted vide Notification No.12/17-CT(Rate) dated 28.6.17 (serial no.2) I further add as under :-

The "supply of a going concern" is exempted from GST subject to the fulfillment of the following conditions:-

(i) The sale is for consideration.

(ii) The purchaser is registered or required to be registered for GST.

(iii) The parties (seller and purchaser) have agreed in writing that the supply is of a going concern.

(iv) Both the parties must enter into an agreement known as a "sale of business contract", on or before the date of the transfer of the going concern business. This means that a written agreement cannot be entered into after the business has been transferred to the purchaser.

(v) The agreement must specify that the supply (i.e. the business) is a going concern before the contracts are exchanged. This is ultra-crucial point because it shows that all concerned parties clearly acknowledge that the business is actually a going concern.

Two decisions of AARs are given below (One is in favour of the assessee and other is in favour of the Department. So precautions have to be taken.

2019 (24) G.S.T.L. 480 (A.A.R. - GST) = 2019 (4) TMI 1499 - AUTHORITY FOR ADVANCE RULINGS, UTTARAKHAND IN RE : INNOVATIVE TEXTILES LTD.

2019 (20) G.S.T.L. 679 (A.A.R. - GST) = 2018 (12) TMI 767 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA IN RE : MERCK LIFE SCIENCE PRIVATE LIMITED

AI Summary

Supply of going concern exemption: slump sale attracts nil GST if prescribed written and registration conditions are met. A slump sale characterized as the supply of a going concern is exempt from GST under the relevant notification provided specified conditions are met: the sale is for consideration; purchaser is registered or required to be registered; parties agree in writing that the supply is a going concern; and a sale of business contract stating the going-concern nature is entered into on or before the date of transfer.