GST on sale of ongoing concern

[Kaustubh Karandikar]

XYZ (Proprietory Concern) has sold its entire business to PQR Pvt. Ltd. Under slump sale of ongoing concern arrangement i.e., transfer of a whole of business concern as a going concern. XYZ had received approx. ₹ 50 Crores against this sale. As per Sr. No. 2 of Notification No. 12/2017- Central Tax (Rate) dt. 28.06.2017 as amended, there is an un – conditional exemption from payment of GST for Services by way of transfer of a going concern, as a whole or an independent part thereof. Accordingly, XYZ is not liable to pay GST on the amount of ₹ 50 Crores received. 1) Whether XYZ is required to prepare Tax Invoice and pay GST on the goods viz. capital goods, Raw/ Packing Materials and Finished Goods physically transferred to PQR Pvt. Ltd. after the date of sale deed entered in to with PQR?

[Rajagopalan Ranganathan]

Sir,

According to Sl. No. 4 (c) of Schedule II of CGST Act, 2017 "where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless-

(i) the business is transferred as a going concern to another person; or

(ii) the business is carried on by a personal representative who is deemed to be a taxable person.

Therefore, the amount of 50 crores received by XYZ includes the cost of capital goods, Raw/ Packing Materials and Finished Goods physically transferred to PQR Pvt. Ltd. Therefore the exemption granted by Sr. No. 2 of Notification No. 12/2017- Central Tax (Rate) dt. 28.06.2017 as amended is applicable to capital goods, Raw/ Packing Materials and Finished Goods physically transferred to PQR Pvt. Ltd.

[Kaustubh Karandikar]

thanks Rajgopalan ji for your detailed reply

[Shilpi Jain]

Only a bill if supply needs to be prepared for the sale of business as going concern.

[CA Hemanth Kumar]

Agreed with experts view.

Being an exempt supply we need to issue Bill of supply and not tax invoice. Also we need to comply the requirment of rule 42

AI Summary

Exemption for transfer of going concern treats sale and transferred business assets as non-taxable; issue bill of supply. Transfer of an entire business as a going concern attracts the unconditional exemption under Notification No. 12/2017, so the sale consideration and goods forming part of the business assets (capital goods, raw/packing materials and finished goods) are not subject to GST. Where the business transfer qualifies as a going concern, the deemed-supply rule on cessation does not apply; the transaction should be documented as an exempt supply by issuing a bill of supply (not a tax invoice) and complying with applicable procedural requirements such as rule 42.