The Authority for Advance Ruling (AAR) has passed an order mentioning that now the sale of ‘Going Concern’ of a business will be exempted from Goods and Services Tax (GST).
The Karnataka bench of the AAR ruled on the basis of an application lodged by a food company to sell its business along with current assets, liabilities, fixed assets and bank loans, for an approximate deliberation.
The Authority of Advance Ruling also mentioned that according to the government notification, in such cases of transfer of a going concern of a business attracts a nil rated GST and a ‘supply of service’ are applicable on it.
A going concern can be understood as a concept of accounting and exercisable to the business of a relevant company by means of a whole. Here, transfer of a going concern stands for transfer of a running business to be carried forward by the buyer in form of an independent business.
This ruling has resolved the doubt and put it clear about the GST implications on traditional dividing and demerger transactions.
AMRG & Associates Partner said, “This ruling categorising the transaction of transfer of running the business as a supply of service would be a nightmare for corporate’s undertaking mergers and acquisitions, as it would entice higher compliance on account of GST and would also force amalgamating company for proportionate reversal of common input tax credits.”
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