GST: Business Transfer from Another State Deemed “Supply of Services”, AAR

Despite when the firms move their business from one state to the other would now face tax issues because this will be acknowledged as a supply and encounter the GST.

A recent ruling via Authority for Advance Ruling (AAR) upon the transfer of the business from one state to another through a similar firm would be acknowledged as “supply of services.” AAR held that this is to be recognized as a supply of services.

Creating the same ruling will lead to GST issues for various firms going forward.

“Tax expert specified One may argue that if transactions between ‘distinct persons’ i.e. two separate locations of the same Company are made liable to tax under GST, other conditions being satisfied, the benefit of exemptions, if any, on transactions between distinct persons should also be available,”

The supply of services poses an essential fact as every supply of services can result in taxes beneath the GST system.

“This is a unique ruling on the transfer of business between two separate locations of the same Company. While AAR held otherwise, Appellate authority has held the transaction to be eligible for tax on the ground that business was not transferred to ‘another person’ but to ‘distinct persons’ under GST, said the tax expert.”

As per the company Shilpa Medicare ltd at Vizianagaram, Andhra Pradesh shifted its business to another unit–. Shilpa Medicare Limited, Bengaluru, (Bangalore) in rural Karnataka. The tax council mentioned that this results in the supply of services identical to when the firm sells the goods or when the taxable services are given through the company to the other.

Beneath the GST system firms need to enroll in every state where they used to function. All the states separately will be treated as different companies and the transactions among them will be subjected to tax. When the firm moves away from one state to the other then it results in lesser GST collections to the state.