TMI Blog2019 (10) TMI 753X X X X Extracts X X X X X X X X Extracts X X X X ..... and these assets are sought to be transferred or disposed of by the applicant and they undoubtedly no longer form part of those assets, then such transfer or disposal would be a supply of goods by the applicant and it is immaterial whether the said transfer/disposal is for a consideration or not - they would be treated as supply of goods as per entry no. 4(a) of Schedule II to the CGST Act. Tthe transaction of transfer of ownership of business assets in the course or furtherance of business for a consideration (being the monetary value in relation to the transfer of such assets) would constitute a supply in accordance with the provisions of clause (a) of Section 7(1) of the CGST Act and the same would be the supply of goods in accordance with the entry no. 4(a) of the Schedule II to the CGST Act. Value of taxable supply - HELD THAT:- Since there is no price actually paid or payable for the said supply of goods, section 15(4) of the CGST Act would become applicable for determining the value of this supply - The value of the supply is prescribed in rule 27 of the CGST Rules, 2017 which is related to the determination of the value of supply of goods or services where the conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017 and shall be chargeable with GST, as per provisions of Central Goods and Services Tax, 2017 (alternatively CGST ), the Karnataka Goods and Services Tax, 2017 (alternatively KGST ) and Integrated Goods and Services Tax, 2017 (alternatively IGST ) and rules contained therein? 2. If the answer to above question is in affirmative, should the value appearing in the books as on the date of disposal may be construed as the open market value on which GST is to be discharged as per Rule 27 of the CGST rules 2017? 5. The authorized representative Sri. Rohith Kumar Singh, Charted Accountant appeared for personal hearing proceedings and submitted written arguments inter alia stating as under: 5.1 The registered office of the applicant is situated at No.570, New No.22, 32nd D Cross, 11th Main, Jayanagar 4th Block, Bengaluru - 560011 and the same is used as its corporate office. They operate various support departments such as Sales, marketing, IT, Finance etc. from the aforesaid office. The said premise is taken on lease from 01.07.2011 to 30.06.2022 with a lock in period of first three years. 5.2 The applicant now wishes to vacate the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply of goods or services or both like kind and quality; d) If the value is not determinable under clause (a) or clause(c), be the sum total of consideration in money and such further amount in money that is equivalent to consideration not in money as determined by the application of Rule 30 or Rule 31 in that order. 8. FINDINGS AND DISCUSSION 8.1 We have considered the submissions made by the applicant in their application for advance ruling as well as the submissions made by Sri. Rohith Kumar Singh, Chartered Accountant and authorised representative of the applicant company, during the personal hearing. We also considered the issue involved on which advance ruling is sought by the applicant, relevant facts the applicant's interpretation of law. 8.2 It is an admitted fact that the applicant had taken the building on rent or lease during the earlier regime for business purposes and has invested in the furnishing of the building to suit his requirements. They capitalised the assets as Office Equipment, furniture and fittings in their books of accounts. The applicant stated that they have not claimed any input tax credit under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is an admitted fact that the assets sought to be transferred are capitalised under the head Office equipment, furniture and fittings and forms the part of the assets of the business entity, i.e. applicant and these assets are sought to be transferred or disposed of by the applicant and they undoubtedly no longer form part of those assets, then such transfer or disposal would be a supply of goods by the applicant and it is immaterial whether the said transfer/disposal is for a consideration or not. Hence they would be treated as supply of goods as per entry no. 4(a) of Schedule II to the CGST Act. 8.6 However, the sub-section (1A) to section 7 to the Central Goods and Services Tax Act 2017, which is inserted w.e.f. 01.02.2019, states as under: (1A) where certain activities or transactions, constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II. That means Schedule II only differentiates a supply either as a supply of goods or a supply of services in case of an activity which has constituted a supply in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply; Here, the applicant states that there is no payment in the form of money or otherwise by the applicant to the landlord and hence this sub-clause would not apply to the transaction. However, if the clause (b) is considered, the consideration in relation to a supply of goods or services or both would include the monetary value of any act or forbearance by the applicant in response to the supply of goods or services. Evidently, the writing off of the value of assets in the balance sheet by the applicant is an act related to the transfer of property in assets and this monetary value of that act would form the consideration in relation to the supply. 8.8 In view of the above reasons, the transaction of transfer of ownership of business assets in the course or furtherance of business for a consideration (being the monetary value in relation to the transfer of such assets) would constitute a supply in accordance with the provisions of clause (a) of Section 7(1) of the CGST Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services or both based on cost.- Where the value of a supply of goods or services or both is not determinable by any of the preceding rules of this Chapter, the value shall be one hundred and ten percent of the cost of production or manufacture or the cost of acquisition of such goods or the cost of provision of such services. 10.3 Rule 31 of the CGST Rules, 2017 reads as under: 31. Residual method for determination of value of supply of goods or services or both.- Where the value of supply of goods or services or both India cannot be determined under rules 27 to 30, the same shall be determined using reasonable means consistent with the principles and general provisions of section 15 and the provisions of this Chapter. 10.4 In view of the above provisions of CGST Rules, 2017, it is clearly evident that the value of the supply is to be determined by the following (in the same order) (a) open market value of such supply, (b) value of supply of goods of like kind and quality; (c) 110% of the book value of such goods in the books of accounts, and if none of the above is possible, it needs to be determined as p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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