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?

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.