Transfer Of Business Unit Shall Be Treated As A Supply Of Services: West Bengal AAR

The West Bengal Authority of Advance Ruling (AAR), consisting of members Brajesh Kumar Singh and Joyjit Banik, has ruled that the transfer of business units shall be treated as a supply of services. The applicant, Cosmic Ferro Alloys Limited, is in the business of manufacturing ferro alloys and cold rolled formed sections with its factories at Barjora (FERRO Unit) and Singur (CRF business) respectively. The entire operations of the applicant were segmented into two units, i.e., the FERRO Unit and the CRF Unit, and both the units are functional and running independently. The applicant intended to sell its CRF unit as a whole, which involves transferring all the assets to the purchaser, which includes taking over all the liabilities due and payable as on the date of transfer for a lump sum consideration. The applicant has entered into a Business Transfer Agreement (BTA) with the purchaser. The applicant sought an advance ruling on the issue of whether the transaction would amount to a supply of goods, supply of services, or supply of goods and services. Yet another issue raised was whether the transaction would be covered under Entry No. 2 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The term 'going concern' is not defined under the GST Act or rules framed there under. The applicant has submitted that the concept of "going concern" has been defined in Accounting Standards – 1 issued by ICAI, which states that a fundamental accounting assumption is that of "going concern," according to which "the enterprise is normally viewed as a going concern, that is, as continuing in operation for the foreseeable future." It is assumed that the enterprise has neither the intention nor the necessity of liquidation or of curtailing materially the scale of the operations". The AAR found that the applicant had entered into a BTA agreeing to sell the CRF business. The purchaser has also agreed to purchase the CRF business, having assets and all liabilities attached to the said CRF Unit as a going concern. The AAR ruled that to qualify as a "going concern," the business must not have the intention or necessity of liquidation or of curtailing materially the scale of the operations. The applicant has not furnished any documentary evidence from the auditor with regard to the entity's ability to continue in operation for the foreseeable future. In the absence of any documentary evidence, the AAR was unable to conclude that the applicant has neither the intention nor the necessity of liquidation or of curtailing materially the scale of the operations. "The transaction would be covered under Entry No. 2 of the Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 subject to fulfilment of the conditions to qualify as a going concern," the AAR said. Applicant's Name: Cosmic Ferro Alloys Limited Citation: 02/WBAAR/2022-23 Dated: 22.04.2022 Click Here To Read/Download Order

Transfer Of Business Unit Shall Be Treated As A Supply Of Services: West Bengal AAR

Mariya Paliwala

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Transfer Of Business Unit Shall Be Treated As A Supply Of Services: West Bengal AAR

Mariya Paliwala

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

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This is a premium content
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