KA AAR: 18% GST Levy on Transaction of Transfering or Selling of an Independent Business

The transfer or sale of one of the independently running business divisions draws an 18% GST, Karnataka Authority for Advance Ruling (AAR) retained.

The transaction of transfer or sale of one of the independents who is administrating the business divisions as a whole, the two-member bench of M.P. Ravi Prasad and Kiran T. Reddy witnessed and with all the assets and liabilities of the independent business division on a going concern basis, constitutes a transaction of “supply” under Section 7 of the CGST Acts.

The petitioner would get engaged in the business transfer agreement in writing on stamp paper of requisite value at Bengaluru with M/s Tessolve Semiconductor Private Limited, a private limited company incorporated under the Indian Companies Act, 2013.

The petitioner furnished that, subject to the “Business Transfer Agreement or Business Sale Agreement,” it has sold the independent running business of “providing/supplying engineering services primarily relating to semi-conductor services”, including with all the assets and liabilities as an exclusive going matter.

The problem concern was if the transaction of the transfer or sale of one of the independent running business divisions of the petitioner, as a whole, including the assets and liabilities of the independent business division comprise the supply transaction under Section 7 of the CGST and SGST Acts.

The AAR determined that the supplier, i.e., the applicant, and the recipient of the supply are unrelated and that the price is an exclusive consideration for the supply, so the value of the contested supply would be the transaction value, which is the price actually paid or liable to be get paid. As a result, the applicant must calculate the value of the supply. As a result, because the transaction constitutes a financial service, it is covered under SAC 997119. The relevant GST rate for the contested transaction is 18%.