2024 (1) TMI 1344 - AAR - GST

Supply or not - transfer of business by the Airport Authority of India to M/s. Adani Thiruvananthapuram International Airport Limited - section 7 of the Central Goods and Service Tax Act 2017 (CGST) viz-a-viz Kerela State Goods and Service Tax Act 2017 - supply as going concern or not - applicability of Entry No. 2 of the exemption notification No. 12/2017-Central Tax (Rate) dated 28-06-2017 issued u/s Section 11 of CGST Act 2017 - GST on the transfer of Existing assets (RAB) Aeronautical Assets non-aeronautical assets and Capital work in progress by M/s. Airport Authority of India to the M/s. Adani Thiruvananthapuram International Airport Limited - transfer of asset be treated as services or not - concession fees paid by M/s. Adani Thiruvananthapuram International Airport Limited to M/s. Airports Authority of India be treated as consideration for transfer of business or not - GST on Monthly/Annual concession fees charged by the Applicant on the M/s. Adani Thiruvananthapuram International Airport Limited - GST on the invoice raised by the Applicant for reimbursement of the salary/ staff cost on M/s. Adani Thiruvananthapuram International Airport Limited - GST on the reimbursement claimed of Municipal tax Property Tax and Water Charges by the Applicant from M/s. Adani Thiruvananthapuram International Airport Limited - reversal in accordance with section 17 (2)/(3) of CGST Act viz-a-viz KSGST Act. Whether the transfer of business by the Airport Authority of India to the M/s. Adani Thiruvananthapuram International Airport Limited be treated as Supply u/s. 7 of the Central Goods and Service Tax Act 2017 ( CGST ) viz-a-viz Kerela State Goods and Service Tax Act 2017 (KGST)? - HELD THAT - The transaction involved herein is not the transfer of business by the applicant to the concessionaire. However the concessionaire is supplying the service of developing the airport of the applicant and applicant is supplying the service of manpower leasing etc. to the concessionaire and both constitutes supply under Section 7 of the GST Act. Whether the transfer of business by Airports Authority of India to M/s. Adani Thiruvananthapuram International Airport Limited is treated as supply as going concern and covered in clause 4 of schedule II of CGST Act viz-a-viz. KGST? - HELD THAT - There is no concept of Supply as going concern in Schedule 4 of the CGST Act 2017. The concept therein is that of Transfer as going concern . The transaction involved herein cannot be treated as a transfer as going concern. Whether the transfer of business by M/s. Airports Authority of India to M/s. Adani Thiruvananthapuram International Airport Limited is covered under the Entry No. 2 of the exemption notification No. 12/2017-Central Tax (Rate) dated 28-06-2017 issued u/s Section 11 of CGST Act 2017? - HELD THAT - No. The said exemption does not cover the activity involved herein. The said entry covers Services by way of transfer of a going concern . If the answer is negative then whether GST is leviable on the transfer of Existing assets ( RAB ) Aeronautical Assets non-aeronautical assets and Capital work in progress by M/s. Airport Authority of India to the M/s. Adani Thiruvananthapuram International Airport Limited? - HELD THAT - Since the assets mentioned have not been transferred to the concessionaire the question per se is void-ab-initio. However since the amounts are received as a consideration for leasing/supplying the assets to the concessionaire GST is payable on the same. Whether the aforesaid transfer of asset be treated as services and the classification for the same? - HELD THAT - There is no transfer of asset and the question is void-ab-initio Whether the concession fees paid by M/s. Adani Thiruvananthapuram International Airport Limited to M/s. Airports Authority of India be treated as consideration for transfer of business? - HELD THAT - No. It is not consideration for transfer of business. Whether GST is applicable on Monthly/Annual concession fees charged by the Applicant on the M/s. Adani Thiruvananthapuram International Airport Limited? - HELD THAT - Yes. GST is applicable on annual concession fees charged by the applicant on the concessionaire. Whether GST is leviable on the invoice raised by the Applicant for reimbursement of the salary/ staff cost on M/s. Adani Thiruvananthapuram International Airport Limited? If yes at what rate? - HELD THAT - Yes. GST is leviable on the invoices raised by the applicant for reimbursement of salary/staff cost on the concessionaire. It is to be paid at 9% each towards CGST and SGST or 18% IGST as may be applicable under SAC 998519 . Whether GST is applicable on the reimbursement claimed of Municipal tax Property Tax and Water Charges by the Applicant from M/s. Adani Thiruvananthapuram International Airport Limited? - If yes at what rate? - HELD THAT - It is opined that reimbursement of such taxes being reimbursement of expenses do not attract GST and therefore GST is not applicable on the reimbursement of such charges. This ruling is applicable only if such taxes are reimbursed by the concessionaire to the applicant. If such taxes are embedded in the consideration for lease and cannot be identified this ruling does not hold good. Whether any reversal is required in accordance with section 17 (2)/(3) of CGST Act viz-a-viz KSGST Act? - HELD THAT - This ruling is requested without specifying the context or situation in which the same is put. Therefore only a general ruling can be offered. If the applicant has inward supply of goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts then reversal is to be made as per Section 17 (2). There is no reversal to be made under Section 17 (3) since 17 (3) only explains about the value of exempt supply.

Summary

Issues Involved:

1. Whether the transfer of business by the Airport Authority of India (AAI) to the concessionaire is treated as supply under Section 7 of the CGST Act, 2017.
2. Whether the transfer is treated as supply as a going concern under clause 4 of Schedule II of the CGST Act.
3. Applicability of exemption under Entry No. 2 of Notification No. 12/2017-Central Tax (Rate).
4. GST liability on the transfer of existing assets (RAB), aeronautical assets, non-aeronautical assets, and capital work in progress.
5. Classification of the aforesaid transfer as services.
6. Whether concession fees are consideration for transfer of business.
7. GST applicability on concession fees charged by AAI.
8. GST on reimbursement of salary/staff cost.
9. GST on reimbursement of municipal tax, property tax, and water charges.
10. Reversal requirement under Section 17(2)/(3) of CGST Act.

Detailed Analysis:

1. Transfer of Business as Supply under Section 7 of CGST Act:
The ruling clarified that the transaction between AAI and the concessionaire is not a transfer of business. The concessionaire provides services of developing the airport, while AAI provides manpower and leasing services. Both these transactions qualify as supply under Section 7 of the CGST Act as they involve supply and consideration.

2. Supply as a Going Concern:
The concept of 'Supply as going concern' does not exist in Schedule II of the CGST Act. The ruling emphasized that the transaction does not qualify as a transfer of a going concern since the airport or its activities are not transferred to the concessionaire. The agreement is a service arrangement for development and operation, not a business transfer.

3. Exemption under Notification No. 12/2017:
The ruling stated that the exemption under Entry No. 2, which covers 'Services by way of transfer of a going concern', does not apply since there is no transfer of business in this case.

4. GST on Transfer of Assets:
The ruling clarified that existing assets, aeronautical assets, and non-aeronautical assets have not been transferred to the concessionaire; hence, the question is void. However, since the assets are leased, GST is applicable on the lease consideration.

5. Classification of Transfer as Services:
As there is no transfer of assets, this question was deemed void.

6. Concession Fees as Consideration for Business Transfer:
The ruling concluded that concession fees are not consideration for a business transfer. Instead, they are consideration for leasing rights granted to the concessionaire, which constitutes a taxable supply.

7. GST on Concession Fees:
GST is applicable on the concession fees charged by AAI to the concessionaire, as this constitutes a supply of service.

8. GST on Reimbursement of Salary/Staff Cost:
The reimbursement of salary/staff cost falls under "Other employment and labor supply services" classified under HSN 998519, attracting GST at 18% (9% each for CGST and SGST).

9. GST on Reimbursement of Municipal Tax, Property Tax, and Water Charges:
The ruling opined that these reimbursements do not attract GST as they are actuals payable to government departments, aligning with Circular No. 206/18/2023-GST, which states that reimbursement of expenses without value addition is not taxable.

10. Reversal under Section 17(2)/(3) of CGST Act:
The ruling provided a general guideline that if the applicant uses goods or services partly for taxable and partly for exempt supplies, reversal under Section 17(2) is required. However, no reversal is needed under Section 17(3) since it only explains the value of exempt supply. No GST reversal is warranted for the supplies discussed.

Ruling Summary:

- The transaction is not a transfer of business but involves supply of services by both parties.
- No transfer as a going concern; thus, no exemption under Notification No. 12/2017.
- GST is applicable on the lease of assets and concession fees.
- Reimbursement of salary/staff cost is taxable under GST.
- Reimbursement of municipal taxes, property taxes, and water charges does not attract GST.
- Reversal under Section 17(2) is applicable if supplies are partly taxable and partly exempt.