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

GST Exemption for Slump Sales as Going Concern Supported by Notification No. 12/17-CT(Rate); Interpretations Vary A discussion on the applicability of GST on slump sales highlights that such sales are generally exempt from GST when classified as a transfer of business as a going concern. This exemption is supported by Notification No. 12/17-CT(Rate) dated 28.6.17, which specifies conditions such as the sale being for consideration, the purchaser being registered for GST, and a written agreement acknowledging the business as a going concern. Replies from participants affirm the exemption, with references to Advance Rulings indicating varying interpretations, thus advising caution in application.