TMI Blog2022 (4) TMI 1087X X X X Extracts X X X X X X X X Extracts X X X X ..... tute 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 - thus, there is a rendering of supply in the subject case. Whether the transaction of transfer of business by way of merger of two GST registrations/ distinct persons would constitute supply of goods under the GST law? - Whether the transaction of transfer of business by way of merger of two GST registrations/ distinct persons would constitute supply of services under the GST law? - HELD THAT:- Change in constitution of the business is essential otherwise, it cannot be said that there is transfer of business as a going concern - The concept of distinct persons has been introduced under GST law wherein the establishments of a person with separate registrations within the same State/UT are considered as distinct person . In the subject case, M/s Crystal Crop Protection Limited, Nagpur and M/s Crystal Crop Protection Limited, Akola, as units are holders of the same PAN and they are merely distinct persons. Hence, the case at hand doesn t qualify to be a going concern to another person as units are hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of merger of two GST registrations/ distinct persons would constitute supply of services under the GST law? 5. If the transaction qualifies as supply of services , whether the said transaction would get covered under SI. No. 2 of Notification no. 12/2017-C.T. (R) dated 28.06.2017, and therefore not liable to GST? 6. Whether Nagpur registration can file Form GST ITC-02 and transfer unutilized credit balance to Akola registration? 7. In case the Applicant merges the business of Akola registration, then can the Applicant claim credit balance appearing in Akola registration via Form GST ITC 02A in Nagpur registration? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression GST Act would mean CGST Act and MGST Act. 2. FACTS AND CONTENTION - AS PER THE APPLICANT: 2.1 Crystal Crop Protection L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e supply under the GST law? 2.4.1 In the given case, all the conditions mentioned under the definition of supply as per Section 7(1) of CGST Act, between two distinct persons, are getting satisfied and accordingly transaction of transfer of business by way of merger qualifies as supply under GST. 2.5 Whether the transaction of transfer of business by way of merger of two GST registrations/distinct persons would constitute supply of goods under the GST law? 2.5.1 In light of the Section 7(1) of amended CGST Act Part 4(c) of Sch.-II, Applicant submits that, in a case of transfer of business happening on a going concern basis, there is no supply of goods . 2.6 Whether merger between distinct persons would qualify as transfer of business as going concern under the purview of GST Law? 2.6.1 Since the term, going concern is not defined in the GST legislation, applicant relies on various judicial pronouncements in this regard to understand the meaning of Going Concern as under:= 1. In the case of State Of Tamil Nadu vs T.M.T. Drill (Private) Ltd. (1991 (082) STC 0059 Madras), it was held that for a business to be considered as sold as a whole / going ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent part thereof attracts Nil rate of tax. Hence, transfer of business from Nagpur registration to Akola registration is on a going concern basis and accordingly the said transaction would attract Nil rate of tax. 2.8.2 Applicant relies on the Advance Ruling in the case of Shilpa Medicare Limited [AAR No. 05/AP/GST/2020 dated 24 Feb 2020], wherein it was held that transfer of business was a supply though exempted under Notification No. 12/2017-CTR dt 28.06.2017, transfer of ITC was allowed. 2.9 Whether Nagpur registration can file Form GST ITC-02 and transfer unutilized credit balance to Akola registration? 2.9.1 Section 18 (3) of CGST Act enables a registered person to transfer ITC, on transfer of business. rom a perusal of the said Section 18(3), it is seen that firstly, change in the constitution of registered persons denotes a bi-lateral transactions, involving two entities and secondly, the provisions uses the expressions sale, merger, de-merger, amalgamation, etc., as forms of change in constitution. 2.9.2 In relation to the first point, the Applicant submits that the terms in the provision referred above have been understood as referring to a bi-lateral ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of transferring the business of Akola registration with Nagpur registration, then can the Applicant claim credit balance appearing in Akola registration via Form GST ITC 02A in Nagpur registration? 2.10.1 Notwithstanding anything stated above, Applicant submits that even if said transaction does not qualify as a transfer of business under going concern as per GST provisions, applicant should be allowed to merge both its registrations transfer the credit in terms of Rule 41A of CGST Rules. 2.10.2 As per Section 25(2) of CGST Act, a person seeking registration shall be granted a single registration in a State or Union Territory. However, as per proviso to Section 25(2) of amended CGST Act, a person having multiple places of business in a State or Union territory may be granted a separate registration for each such place of business, subject to prescribed conditions. However, if a registered person has availed such benefit in terms of the provisions as discussed above, the provisions does not contain any bar for the registered person to opt out of it. The proviso to Section 25 (2) of CGST Act allows that registered person to have two separate registrations, but it does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f transfer of business by way of merger of two GST registrations/ distinct persons would constitute supply under the GST law? 3.1 As per Sr. No. 2 of Schedule I Section 7 (c) of the CGST Act 2017, supply of goods or services or both between related persons or between distinct persons as specified in section 25(4) of CGST Act, 2017, when made in the course or furtherance of business shall be treated as supply even if made without consideration. Whether the transaction of transfer of business by way of merger of two GST registrations/ distinct persons would constitute supply of goods under the GST law? 3.2 As per Section 7(1A) of amended CGST Act 2017, and Part 4(c) of Schedule II, it is understood that if a business is transferred as a going concern, it does not amount to supply of goods. Whether merger between distinct persons would qualify as transfer of business as going concern under the purview of GST Law? 3.3 The term going concern is not defined in GST legislations. From applicant s submissions it is seen that, the activities of business are continuous, uninterrupted operations are being carried out on a regular basis. Thus, the business from N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er ITC in Form ITC-02 In case the Applicant merges the GST registrations by way of transferring the business of Akola registration with Nagpur registration, then can the Applicant claim credit balance appearing in Akola registration via Form GST ITC 02A in Nagpur registration? 3.7 in view of Rule 41 of CGST Rules, 2017, considering the fact that there are two separate registrations of the Transferor (i.e. Akola registration) and Transferee (i.e. Nagpur registration), the Applicant appears to be eligible to transfer ITC in Form ITC-02. 04. HEARING 4.1 Preliminary e-hearing was held on 18.01.2022. The Authorized representatives of the applicant, Shri. Dhruv Gupta CA and Shri. Shivarajan Kallyanaraman were present. Jurisdictional officer was absent. Application is filed by Nagpur unit question No. 7 asked is about transfer of Akola unit to Nagpur. Since in that case Akola unit will be supplier, application for the question No.7 ought to have been filed by Akola Unit. Hence, question No.7 was not admitted. The jurisdictional officer was directed to file written submission within a weeks time. 4.2 The Application was admitted and Final e-hearing was held on 15.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course or furtherance of business shall be treated as supply, even if made without consideration . Section 7(1A) of amended CGST Act 2017, mentioned as above, prescribes that, 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. Part 4(c) of Schedule II is reproduced as under: - 4 (c) where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless- (i) the business is transferred as a going concern to another person; or ii) the business is carried on by a personal representative who is deemed to be a taxable person. 5.4.4 In view of the above, we have no doubt that; there is a rendering of supply in the subject case. 5.5 We now take up for discussions of the relevant provisions of the GST Laws in respect of Question Nos. 2 and 4 as under: 5.5.1 The term going concern is not separately defined in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng concern. 5.5.5 Hence, the provisions of Para 4 (c) of Schedule II of CGST Act, 2017 do not apply in this case. Therefore, the impugned supply will be treated only as supply of goods and therefore there is no supply of services in the instant case. 5.5.6 The applicant has relied on the Ruling given by the Advance Ruling Authority for Andhra Pradesh in the case of M/s Shilpa Medicare Limited [AAR No. 05/AP/GST/2020 dated 24 Feb 2020], (wherein it was held that transfer of business was a supply of services though exempted under Notification No. 12/2017-CTR dt 28.06.2017, transfer of ITC was allowed), to contend that in the subject case the supply is of services, exempted under Sr. No. 2 of Notification No. 12/2017-CTR dt 28.06.2017. The said Authority also held that the activity is a going concern and classified it to be a supply of service. 5.5.7 We find that the above said order in the case of M /s Shilpa Medicare Limited (AAR No. 05/AP/GST/2020 dated 24 Feb 2020] has been overruled by the Appellate Authority of Advance Ruling, Andhra Pradesh, vide Advance Ruling Order No. AAAR/AP/07 (GST)/2020 dated 10.11.2020 . The said Appellate Authority has held that, M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06. In view of the extensive deliberations as held hereinabove, we pass an order as follows: ORDER (Under Section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) For reasons as discussed in the body of the order, the questions are answered thus - Question 1: - Whether the transaction of transfer of business by way of merger of two GST registrations/ distinct persons would constitute supply under the GST law? Answer: Answered in the affirmative. Question 2: Whether the transaction of transfer of business by way of merger of two GST registrations/ distinct persons would constitute supply of goods under the GST law? Answer: Answered in the affirmative. Question 3: Whether merger between distinct persons would qualify as transfer of business as going concern under the purview of GST Law? Answer: - Not Answered in view of discussions made above. Question 4: Whether the transaction of transfer of business by way of merger of two GST registrations/ distinct persons would constitute supply of services under the GST law? Answer: - Answered in the negative in view of di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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