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2020 (11) TMI 1084 - AAR - GSTLevy of GST - purchase of Biomass Power Plant (8 MW Capacity) by way of transfer of going concern through e-auction - serial no.2 of the Notification No.12/2017-Central Tax (Rote) dated 28/06/2017 - HELD THAT - SCHEDULE II to Section 7 of the CGST Act supra, specifies about the Activities or Transactions which are to be treated as supply of Goods or supply of Services, wherein clause 4 (a) categorically stipulates that where goods forming part of the assets of a business are transferred or disposed of by or under the direction 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. Thus disposal of goods forming part of assets have been categorically stipulated under clause 4(a) of Schedule II to Section 7 of CGST Act, 2017 as supply of goods. Whereas, clause 4(c) of the said schedule II to Section 7 of the CGST Act, 2017 specifically stipulates that the transfer of a business as a going concern does not constitute a supply of goods. The transfer of a business as a going concern is tax-exempt under GST, whereas sale of assets as above being supply of goods will be out of the purview of exemption from tax, eventually having GST implications. Further, as per the sale notice issued by the appointed liquidator, for effecting sale of assets and properties owned by M/s. Vandana Vidhuyat Limited (in Liquidation) under Insolvency and Bankruptcy Coode, 2016, in addition to the Biomass Power Plant (8 MW Capacity) in question, sale of Thermal Power Plant-2x135 MW Capacity was also initiated and it is seen from the letter of intent issued by the liquidator, that the question had bid for the said Biomass Power Plant (8MW Capacity) only M/s. Vandana Vidhuyat Ltd. - whenever there is transfer of business as a Going concern, it shall involve transfer of goods and/or services. Whether the instant supply of sale of assets in entirety is to be treated as supply of woods supply of services con be determined in terms of the definitions of composite supply and mixed supply read with section 8 of the CGST Act 2017. Whenever there is transfer of business as a Going concern, it shall involve transfer of goods and/or services. Whether the instant supply of sale of assets in entirety is to be treated as supply of woods supply of services con be determined in terms of the definitions of composite supply and mixed supply read with section 8 of the CGST Act 2017 - in case the transfer of business as a going concern involves a supply of sate of assets which deserves treatment as principal supply as defined above and that supply is of goods, then the sale of assets as a going concern will have be treated as supply of goods by virtue of section 8 ibid and, therefore, the exemption provided under Notification no. 12/2017- Central Tax (Rate) will not be applicable, the exemption being only eligible to services of transfer of business as a going concern. In the instant case of the applicant, as elaborately discussed in the preceding pare, it is seen that acquiring of assets viz. Biomass Power Plant (8 MW Capacity) by way of sale of assets and properties owned by the Corporate Debtor, M/s Vandana Vidhyut Limited, in Liquidation forming part of Liquidation Estate formed by the Liquidator under Insolvency and Bankruptcy Code, 2016, through e-auction for a consideration is supply of goods and not supply of services in view of the stipulations under SCHEDULE II of Section 7 of the CGST Act, 2017. Thus, the instant sale of Assets and properties viz. Biomass Power Plant (8 MW Capacity) owned by Vandana Vidhyut Limited (in Liquidation), can in no way be supply of services. Notification No. 12/2017- Central Tax (Rate) New Delhi, the 28 th June, 2017, supra provides for exemption to intro-Slate supply of services by way of transfer of a going concern, as a whole or an independent part thereof, whereas here in the case of applicant the supply of biomass power plant is supply of goods and not supply of services in view of the stipulations under schedule II to Section 7 of CGST Act, 2017 - Applicant appears to have misconstrued the sale of Biomass power plant by way of sale as a going concern as supply of services whereas the same is supply of goods by way of transfer as a going concern, and have thus wrongly claimed eligibility towards exemption from GST under serial no.2 of Notification no. 12/2017-Central Tax (Rate) dated 28.6.2017. Thus on the basis of documents furnished by the applicant, we come io the considered conclusion that the instant transaction by the applicant is not eligible to the benefit of Notification No. 12/2017-Central Tax (Rate) New Delhi, the 28th June, 2017 supply of goods, attracting GST at the applicable rate. Exemption provided under serial no.2 of the Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 is not applicable to the said intrastate supply of Biomass Power Plant (8 MW Capacity) as a going concern. GST at the applicable rate is leviable on the said supply.
Issues Involved:
1. GST liability on the purchase of Biomass Power Plant (8 MW Capacity) by way of transfer of a going concern through e-auction. Issue-Wise Detailed Analysis: 1. GST Liability on the Purchase of Biomass Power Plant: Facts of the Case: The applicant acquired a biomass power plant of 8 MW capacity located at Sirgitti Industrial Area, Bilaspur from M/s Vandana Vidyut Limited through an e-auction conducted by a liquidator appointed by the Hon'ble NCLT under the Insolvency and Bankruptcy Code 2016. The liquidator, through a sale notice dated 07.02.2020, declared that the sale was directed by Hon’ble NCLT to be conducted as a going concern. The applicant received a Letter of Intent on 25.02.2020, proposing that GST would be charged in addition to the final bid amount. The applicant contended that the transaction is considered a supply of service and exempt from GST under Sl.No.2 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017. Contentions of the Applicant: The applicant argued that acquiring a power plant unit as a going concern is exempt from GST under Sl.No.2 of Notification No.12/2017-Central Tax (Rate). They cited similar rulings from the Authority for Advance Ruling Karnataka and Uttarakhand, which upheld that the transfer of a business unit as a going concern is exempt from GST. The applicant emphasized that the biomass power plant has an existing power purchase agreement and intends to continue the business operations as they are, thus qualifying as a going concern. Legal Position, Analysis, and Discussion: The authority clarified that the provisions for implementing the CGST Act and the Chhattisgarh GST Act, 2017 are similar. The applicant sought an advance ruling based on the Hon'ble NCLT's decision directing the liquidation of M/s Vandana Vidyut Limited as a going concern. The Insolvency and Bankruptcy Code, 2016 stipulates that once an entity defaults on a certain threshold amount, the Corporate Insolvency Resolution Process (CIRP) is triggered, and the management of the entity’s assets vests with an interim resolution professional or resolution professional who continues to run the business as a going concern until the insolvency proceedings are over. Relevant Legal Provisions: The authority referred to Notification No.12/2017-Central Tax (Rate), which exempts the intra-State supply of services by way of transfer of a going concern from GST. They also referenced Section 7 of the CGST Act, 2017, which defines the scope of supply, and SCHEDULE II, which specifies activities or transactions to be treated as supply of goods or services. Clause 4(a) of SCHEDULE II states that the transfer or disposal of goods forming part of the assets of a business is a supply of goods, while Clause 4(c) specifies that the transfer of a business as a going concern does not constitute a supply of goods but a supply of services. Conclusion: The authority concluded that the sale of the biomass power plant by the liquidator is a supply of goods, not services. The claimed exemption under Notification No.12/2017-Central Tax (Rate) is not applicable as it pertains to the transfer of a business as a going concern, which is a supply of services. The sale of assets as a going concern is considered a supply of goods and thus subject to GST. Consequently, the exemption provided under serial no.2 of the Notification No.12/2017-Central Tax (Rate) does not apply to the intrastate supply of the biomass power plant, and GST at the applicable rate is leviable on the said supply. Order: The ruling concluded that the exemption under serial no.2 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 is not applicable to the intrastate supply of the Biomass Power Plant (8 MW Capacity) as a going concern, and GST at the applicable rate is leviable on the said supply.
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