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TMI Blog2021 (4) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... anali, Chennai-600068 (hereinafter called the 'Applicant') is registered under the GST Vide GSTIN 33ABNFS5242G1Z4. The applicant is a partnership firm acting as clearing and forwarding (C&F) agents and distributors for Pharma products and other business. They have sought Advance Ruling to clarify whether the good will paid to the partners at the time of retirement is liable to be taxed under GST Act. The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that they are a partnership firm functioning in the name and style -SHIV-SANKARA HEALTH CARE ENTERPRISES- acting as C&F agents and distributors for Pharma Products and other business consisting of the following partners with effect from 15/10/2008 as per partnership deed dated, 14/10/2008- a) R. SELVARAJ; b) R. SANKAR; c) S. SIVAPRAKASAM with profit sharing ratio of 1/31d each. They have stated that the above partnership was modified and the following two partners were admitted in addition to the existing part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd upon deduction of liabilities did not involve an element of transfer within meaning of section 2(47) and not chargeable to income tax following the decision in the case of Prashant S. Joshi v. ITO. In view of the above facts, the applicant has sought the authority to clarify whether the goodwill paid to retiring partners is liable to GST. 3.1 The applicant was extended an opportunity to be personally heard on 13.12.2019. The applicant appeared before the authority and submitted copy of retirement deed. They stated that two partners were retiring from the partnership firm and they were given a share of profit and goodwill. They stated that the retiring partners have stated that any tax liability should be paid by the applicant. They also stated that they will submit details of financial accounts, details of how consideration was arrived at. They also stated that this is a transfer of a going concern and exempted under Notification 12/2017 CT (Rate). They were informed by the authority that in this case the supply of services of goodwill is made by the retiring partners and hence the applicant is the retiring partner. They stated that the application may be considered and informe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goodwill payment made to the retiring partners. In the cited letter the applicant has stated that as per retirement deed the taxes if any, income tax/GST is to be paid on payment towards share of profit/goodwill, it has to be observed by the continuing partners and retiring partners will not have any liability on it. 4. The State Jurisdictional officer vide their letter dated 12.12.2019 submitted that there is no show cause notice/ issue pending adjudication and also no demand is pending in respect of the applicant. 5. The centre Jurisdictional authority vide their letter dated 19.03.2020 submitted the following comments on the issue raised in the advance ruling application of the applicant: * Good will is an intangible asset associated with a business combination. Goodwill is recorded when a company acquires (purchases) another company and the purchase Price is greater than 1) the fair value of the identifiable tangible and intangible assets acquired, minus 2) the liabilities that were assumed. In the issue on hand, Goodwill is paid to the retiring partners of the firm. This amount paid as goodwill would represent the amount paid for the retiring partners for giving up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. 6. The applicant vide their submissions had not provided the details as to how the goodwill was arrived and the details of financial accounts of 'Goodwill Account' for 18-19 & 19-20, which are necessary to ascertain the liability to GST. Therefore, another hearing was decided to be extended. Due to the prevailing PANDEMIC situation and in order not to delay the proceedings, the appellant was addressed through the Email Address mentioned in the application to seek their willingness to participate in a virtual Personal Hearing in Digital media vide e-mail dated 03.07.2020. The applicant vide email dated 03.07.2020 submitted that due to COVID-19 issue their office will be closed till 31.07.2020. Accordingly, virtual Hearing was fixed on 15.10.2020 and the applicant was intimated. In response, the applicant stated that their consultant is out of country and they are not able to attend the Virtual hearing. Another opportunity was extended to be heard on 19.11.2020 through virtual mode to which the applicant vide their email dated 09.11.2020 informed that their consultant is out of country and to fix a date in January 2021 for Virtual Personal hearing. Accepting the same, ..... 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