Applicability of GST on sale of ongoing concern

[Kaustubh Karandikar]

1) A Foreign Company is buying a major stake in XYZ(India) under slump sale of ongoing concern arrangement i.e., transfer of a whole of business concern as a going concern.

2) Against this transfer, XYZ will be getting from the foreign company an amount of approx. ₹ 100 Crores. Whether XYZ is required to pay GST on this transaction either under forward charge or reverse charge? In my view it is exempted under Sr.No.2 of Notification No.12/2017- Central Tax (Rate) dt. 28.06.2017 as amended. Views of the experts please.

Further to my views on the above, in my view, XYZ will also be required to proportionately reverse the ITC being supplying exempted service and also will be required to prepare a Bill of Supply for the amount received from the foreign company and to show the same in the GST Returns under the respective column. Expert's views please.

[Shilpi Jain]

Sale of going concern is not liable to GST. From the perspective of reversal of credit, any expense incurred for this sale will have to be reversed as per rule 42.

Another view is that this going concern sale is not a supply at all and thereby no reversal of credit since it will not be an exempt supply.

[Kaustubh Karandikar]

thanks shilpi ji for your advice. But in my view, since there is a specific entry for the same in the exemption notification, it will be treated as exempted supply and reversal as per Rule 42 will be required.

[KASTURI SETHI]

Reversal is not required in respect of goods and services mentioned in Schedule-III, these being not supply. If exempted, reversal is required.

[Shilpi Jain]

@Kaustubh sir - merely because something is exempt does not mean that there is a levy and thereby there is a requirement of exemption.

AI Summary

Sale of going concern and GST liability: whether treated as exempt supply or not a supply affects ITC reversal. Whether GST applies to a slump sale of a whole business as a going concern and whether input tax credit must be reversed is debated. One position treats the transfer as an exempt supply under the notification, requiring proportionate ITC reversal under Rule 42 and issuance of a bill of supply; the alternate position treats the transfer as not a supply under Schedule III, in which case no reversal or GST levy arises.