GST on sale of factory

[Kaustubh Karandikar]

XYZ is owner of one factory located at MIDC. XYZ is selling that factory along with all the assets in the factory for a lump sum amount. The factory is situated on land taken on lease from the MIDC. Now, there will be two types of sale for GST purpose: -

1) Sale of factory building along with its assets. (Assets include Plant & Machinery, F&F, electrical installation etc)

2) Sale of leasehold rights of the land on which the factory building is standing.

Need clarity regarding GST implications on sale transactions mentioned in both the above points along with valuation methodology to be followed.

[Padmanathan KV]

One should try exploring the possibility of treating the transaction as "service by by way of transfer of a going concern" which is exempt under Sl No 2 of Notification No 12/2017-Central Tax Rate:

2

Chapter 99

Services by way of transfer of a going concern, as a whole or an independent part thereof.

Nil

Nil

[Shilpi Jain]

If there is mere sale of assets it would be liable to GST and would be liable to GST at applicable rate for sale of the assets.

Completed land and building - no GST.

However, if it is a sale of the business as a going concern, only then it would be exempt.

[GUNASEKARAN K]

Sale of Plant & Machineries – Liable to GST

Sale of Factory Building – Transfer of ownership under Indian Registration Act subject to other Taxes, such as Stamp Duty

Sale of Leasehold rights - If the leasehold rights are treated as land itself, no tax would be applicable on its assignment. On the other hand, if the said leasehold rights being benefit arising of land is treated separate from land, then the same would be treated as a supply which liable to GST

Sale of business as going concern - "Services by way of transfer of a going concern, as a whole or an independent part thereof, attracts nil rate of GST"

AI Summary

GST treatment of factory sale: asset disposals taxable, transfer as going concern exempt, lease rights case-specific. Sale of factory assets such as plant and machinery, furniture and fittings and electrical installations is taxable under GST at applicable rates, whereas a transfer of the business as a going concern may be nil-rated under the notification for services by way of transfer of a going concern. Transfer of the factory building and leasehold rights must be analysed separately: completed land/building sale is generally not subject to GST, while assignment of leasehold rights can be treated either as transfer of land (no GST) or as a taxable supply depending on its character.