TaxTMI 
TaxTMI 
2026 (9) TMI 1266
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....t the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like manner except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression "GST Act" would mean the CGST Act and the WBGST Act both. 1.2 The applicant, Vivek Hetamsaria proprietor of M/s Ambika Diamond is a proprietorship concern engaged in the wholesale and retail business of gold and diamond ornaments as well as loose diamonds, including natural and lab-grown diamonds. The applicant proposes to transfer its entire proprietorship business as a going concern to M/s Ambika Jewelvista LLP, in which the proprietor is one of the partners, by transferring all assets and liabilities including fixed assets, closing stock, receivables, deposits, cash balances, employees, business rights and other obl....
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....cern. The proposed transfer is intended to be undertaken as on as is basis transaction, whereby the entire business, together with all its assets, liabilities, rights, claims, employees, customers and other components necessary for continuation of the business, would be transferred to the partnership concern. The Applicant submits that the business of M/s Ambika Jewelvista LLP would continue substantially in the same manner and without interruption after such transfer. 2.2 The Applicant states that the proposed merger/transfer of the proprietorship concern into the partnership concern would be implemented through an internal Memorandum of Understanding between the two parties. In terms of the said arrangement, all assets relating to the proprietorship concern, including fixed assets, closing stock, debtors, deposits and cash balance, would be transferred to M/s Ambika Jewelvista LLP. Similarly, all liabilities relating to the proprietorship concern, including capital, unsecured loans, sundry creditors and current liabilities, would also be transferred to the partnership concern. The employees of the proprietorship concern would continue to serve the partnership firm without any ....
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....nsfer, barter, exchange, licence, rental, lease or disposal, made or agreed to be made for a consideration in the course or furtherance of business, as well as the activities specified in Schedule I which are treated as supply even when made without consideration. The Applicant submits that the proposed permanent transfer of the proprietorship concern to the partnership concern constitutes a transfer of the business in the course or furtherance of business and accordingly falls within the scope of supply under the GST law. 2.6 The Applicant further submits that Section 7(1A) of the CGST Act provides that where certain activities or transactions constitute a supply in accordance with Section 7(1), such activities or transactions shall be treated either as a supply of goods or a supply of services as referred to in Schedule II. In the present case, the Applicant has relied upon the decisions in the cases of Mr. Jayesh Popat, M/s Cosmic Ferro Alloys Limited, M/s Rajashri Foods Pvt. Ltd. and Airport Authority of India, wherein transfer of a business or business unit as a going concern has been treated as a supply of services and has been held to be covered under Entry No. 2 of Notif....
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....es, is proposed to be transferred and the transferee would continue the business. Thus, the transfer cannot be treated as a mere transfer of individual goods or closing stock. The closing stock and other assets form part of the business being transferred as a whole and consequently partake of the character of the transfer of business as a going concern. 2.10 The Applicant points out that Entry No. 2 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 specifically provides exemption in respect of "Services by way of transfer of a going concern, as a whole or an independent part thereof." The rate prescribed under the said entry is Nil. Since the transaction proposed by the Applicant involves transfer of the entire proprietorship business as a going concern to M/s Ambika Jewelvista LLP, the Applicant submits that the transaction is covered under the aforesaid exemption entry and is accordingly exempt from GST, subject to satisfaction of the conditions necessary for treating the transaction as a transfer of a going concern. 2.11 The Applicant submits that the proposed transaction satisfies the essential characteristics of a transfer of a going concern. The concept of....
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....ness operations, establishes that there is a permanent transfer of the entire business as a going concern. The transfer is not confined merely to the closing stock or any isolated asset. Rather, the business itself, together with the necessary components required for its continued operation, is being transferred. The employees would continue without interruption, the business relationships would be preserved and the transferee would continue the same business. These circumstances, according to the Applicant, satisfy the tests applicable for determining whether a business has been transferred as a going concern. 2.15 The Applicant also relies upon the decision of the Hon'ble Madras High Court in State of Tamil Nadu v. T.M.T. Drill (Private) Limited, wherein the Court considered the requirement of transfer of the assets of a business for determining whether a business is sold as a whole or as a going concern. The Applicant further refers to the decision of the Hon'ble Delhi High Court in Indo Rama Textile Ltd., wherein the concept of a going concern was considered and it was held that a company is transferred as a going concern when the assets and liabilities transferred c....
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....nsferred, subject to fulfillment of the applicable conditions. 3. Submission of the Revenue 3.1 The concerned officer from the revenue has not expressed any view on the merit of the issue raised by the applicant. 4. Observations & Findings of the Authority 4.1 We have gone through the records of the issue as well as submissions made by the authorized representatives of the applicant during personal hearing. The Revenue has not given any view on the merit of the case. 4.2 As per the facts and evidences submitted before us, the applicant Vivek Hetamsaria is the proprietor of M/s. Ambika Diamond. The concern is a firm (wholesaler and retailer) dealing in gold, diamond ornaments and loose diamond (natural and lab grown). The applicant is registered under the Goods and Services Tax (GST). Under the proprietorship concern the applicant has fixed assets and current assets in the form of inventory, receivables, deposits and others. According to the submissions made before us, Vivek Hetamsaria along with Rashmi Hetamsaria being partners have formed a Limited Liability Partnership Firm under the name of M/s Ambika Jewelvista LLP holding GSTIN number 19ACMFA5259P1ZJ, having ....
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....act the Business, keep available the services of its present employees, if the employees do not leave at their own will; • preserve its relationship with, customers, having business dealing with it, to the end that its ongoing ability to provide services shall be unimpaired at the Closing; and • Conduct business to ensure continuity In terms of MoU all rights, title, ownership, interest in and to the business, assets, and customers including liabilities will get transferred as a going concern. In short, the entire business will be transferred. The proprietorship firm M/s. Ambika Diamond will cease to exist after filing all the necessary returns and all necessary compliance will be undertaken before surrendering the registration. Foreseeable Future: All present and future assets, liabilities, rights, claims, employees, businesses, etc., shall be taken over by M/s Ambika Jewelvista LLP partnership firm. All future liabilities of GST, as and when arise, shall be met by the firm, in the normal course of business without any hindrances or stoppages. After the merger, M/s. Ambika Diamond (Proprietorship Concern) shall apply for cancellation of registration....
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....matters placed in the application. 4.8 The first two questions placed before us relate to the issues whether the above noted transfer amounts to supply under the GST Acts and if it is a supply, whether it is a supply of goods or supply of services. To understand the scope of supply we are referring to the relevant portions of Section 7 of the CGST Act, 2017. Section 7. Scope of supply.- (1) For the purposes of this Act, the expression - "supply" includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration. Explanation.-For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be dee....
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....er it is a supply of goods or supply of services. Section 7(1)(c) of the CGST Act, 2017 stipulates that supply includes 'the activities specified in Schedule I, made or agreed to be made without a consideration'. If we refer to Schedule I, we will find that Entry No. 1 specifies that 'permanent transfer or disposal of business assets where input tax credit has been availed on such assets' shall be treated as supply even if made without consideration. Section 7(1A) of the CGST Act, 2017 leads us to Schedule II appended to the act. This Schedule refers to 'activities [or transactions] to be treated as supply of goods or supply of services'. Serial no. 4 of Schedule II relates to transfer of business assets. The entries under this serial number are reproduced as under: Transfer of business assets (a) where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, such transfer or disposal is a supply of goods by the person; (b) where, by or under the direction of a person carrying on a business, goods held or used for the ....
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....inancial challenges without major restructuring. • Long-term planning: There is an absence of any intention or need to liquidate or materially curtail the scale of operations in the near future. • Asset valuation: Financial statements are prepared under the assumption that assets will be used over their useful life, not sold off immediately at a lower liquidation value. • Operational integrity: The core products or services of the company are considered viable and have a reasonable market position. 4.12 For the purpose of taxation, the only reference to going concern in the GST regime can be found in Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended. The relevant entry is reproduced hereinunder: Sl.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent.) Condition (1) (2) (3) (4) (5) 2 Chapter 99 Services by way of transfer of a going concern, as a whole or an independent part thereof. Nil Nil The above noted services are applicable to both the cases - transfer of a going concern as a whole or transfer of an independent part ....