GST on transfer of partnership share in LLP

[Narayan Pujar]

There is a corporate restructuring within a bunch of group companies. I would like to know the taxability under GST of transfer of partnership share by a partner in LLP to a existing partner or in case of a third party against shares in a private limited company.

As per my understanding, shares against share in partnership is a barter transaction. Transfer of shares will be outside GST as it securities. But the other leg, i.e., transfer of partnership share the same will qualify as 'supply of service'.

[Shilpi Jain]

How does transfer of partnership share occur? 

Retirement and admission of partner right? So are you saying that this person is giving away his right of profit which is a service?

[Shilpi Jain]

Is there any agreement to this effect?

[Narayan Pujar]

There is no agreement yet. But this arrangement is still in talks and we are exploring the avenues. Yes, existing partner is giving up interest in partnership and retiring. In return he is receiving  shares in another company and Company will become the new partner.

[Shilpi Jain]

The nature of agreement between the retiring partner and the incoming partner will decide the taxability 

In the other scenario, it would be in the nature of repayment of capital of the retiring partner and should not be liable to GST.

AI Summary

GST Impact on Transferring Partnership Shares in LLP Restructuring: Barter or Supply of Service? Analysis Under GST Rules. A discussion on the GST implications of transferring partnership shares in an LLP during corporate restructuring among group companies. The original query seeks clarity on whether such transfers, especially when exchanged for shares in a private limited company, are taxable under GST. The consensus among participants suggests that while the transfer of shares is considered a barter transaction and typically falls outside GST as securities, the transfer of partnership shares may qualify as a 'supply of service.' The taxability depends on the nature of the agreement between retiring and incoming partners, with some scenarios possibly exempt from GST.