TRANSFER OF ONGOING BUSINESS

[NILESH PITALE]

Dear expert

One of my client is carrying proprietary concern and registered under GST , now he intend to transfer his business to other individual ( other than Relatives),

1) Can he Transfer ?

2) In balance sheet Residence flat is there against which Bank CC Liability also there

3) Already GST Notices are issued and Appeal have been filed

4) is assignment deed required

please guide---

[Sadanand Bulbule]

Dear querist

Please refer Notification No.12/2017-Central Tax [Rate] dated 28/06/2017 which specifically exempts "services by way of transfer of a going concern, as a whole or an independent part there of". Also refer the provisions of Section 17[2] of the GST Act read with Rule 42 of the GST Rules as far as reversal of ineligible ITC on the subject exempt supply is concerned.

[Shilpi Jain]

Business transfer whether can be done or not is not a matter which can be regulated by tax law. So you can proceed with selling if you wish to.

In case it is a running business then no liability if you are transferring such business if the purchaser also would continue such business.

Even if there is any case pending you can transfer. Just that in case you do not pay any liability then the purchaser also will be jointly liable to pay the tax. Look at section 85 of CGST Act.

[Padmanathan KV]

Since, factual complexities are involved (such as residential property in business books etc), It would be advisable to consult an expert (lawyer/CA) first and carry out the relevant documentation as required under the Law.

As you maybe aware, the GSTIN cannot be transferred as such (so question of notices and appeals getting transferred doesn't arise). However, the business as a whole can be transferred by raising an invoice to the transferee. Transfer of business as a going concern would be exempt from GST also. Once business is transferred, you can close the GST registration (subject to ongoing litigation etc).

[Shilpi Jain]

Also have a look at the tax liabilities under Income Tax Act before deciding on the manner of the transfer

AI Summary

Transfer of going concern may be GST-exempt but triggers input tax credit reversal and potential joint liability for unpaid tax. Transfer of a proprietary business as a going concern is exempt from GST but requires reversal of ineligible input tax credit under Section 17(2) read with Rule 42; GSTIN is not transferable, notices and appeals remain with the registered person, and the purchaser may incur joint liability under Section 85 for unpaid tax. Appropriate documentation (invoice, assignment deed), professional advice, and consideration of Income Tax consequences are advisable, with closure of GST registration possible after relevant matters are addressed.