TMI Blog2023 (4) TMI 959X X X X Extracts X X X X X X X X Extracts X X X X ..... t for reimbursement of the salary/ staff cost on M/s. Adani Jaipur International Airport Limited - reimbursement claimed of Municipal tax, Property Tax and Water Charges by the Applicant from M/s. Adani Jaipur International Airport Limited - reversal as required in accordance with section 17 (2)/ (3) of CGST Act viz-a-viz RGST Act. Whether the business module executed through agreement between M/s. AAI and M/s. ADIAL is transfer of business or not? - HELD THAT:- The applicant i.e. Airports Authority of India (AAI) is the authority created under the Airports Authority of India Act, 1994 (AAI Act). AAI Act was enacted to provide for the constitution of the AAI for the better administration and cohesive management of the airports. AAI has been created for the purposes of establishing or assisting in the establishment of the airports and for matters connected thereto. On referring the definition of Goods in CGST Act, Section 2 (52) CGST Act, defines Goods as follows: goods means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in clause 4 of schedule II of CGST Act viz-a-viz RSGST? - HELD THAT:- Concession Agreement dated 16.01.2021, AAI has only transferred its Jaipur Airport business to the M/s AJAIL (SPV) but its other business are not transferred AAI through this Concession Agreement, hence AIA has not ceased to be a Taxable person and for other business the AAI is a taxable person and registered under GST - Schedule II (4) CGST Act stipulates whether the transactions with respect to 'Transfer of Business Assets' to be treated as supply of Goods or supply of services. Having gone through the subject Contract, we find the subject business arrangement is 'transfer of going concern'. As such, there are no merit to vivisect the subject Contract and examine the treatment of aeronautical assets/ non aeronautical assets/ other business assets in the Contract entered between AAI and SPV - the transfer of business by Airports Authority of India to M/s AJAIL (SPV) is transfer of a 'going concern' and the same is not covered in clause 4 of schedule II of CGST Act. Whether the transfer of business by M/s. Airports Authority of India to M/s. Adani Jaipur International Airport Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seems the supply of manpower services by AAI to the M/s. Adani Jaipur International Airport Limited (SPV). Thus, it is clear that the employees of AAI may opt or may not opt for employment under the SPV and there may be circumstances in which they do not receive employment offers or they continue their services with the AAI and in this condition they will be redeployed by the AAI and removed from the airport which will be managed and operated by the SPV. Thus there is no case for exemption on the reimbursement of emolument of employees to the AAI as services of manpower supply is provided by one distinct entity to another distinct entity where transfer of business as a going concern is not a precondition nor this supply of manpower services is a corollary to the agreement for transfer by outgoing concern for the operations management and development of the airport - the invoice raised by the Applicant for reimbursement of the salary/ staff cost on M/s. Adani Jaipur International Airport Limited is falls is a consideration for supply which falls under the ambit of manpower service and hence taxable @ 18%. not for supply of transfer of business as a going concern. Reimbursemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Airports Authority of India Act, 1994 (the 'AAI Act'). AAI Act was enacted to provide for the constitution of the AAI for the better administration and cohesive management of the airports. AAI has been created for the purposes of establishing or assisting in the establishment of the airports and for matters connected thereto. As per Chapter III, Section 12 (1) (2) of AAI Act, the functions of the AAI are: To manage the airports, the civil enclaves and the aeronautical communication stations efficiently; To provide air traffic service and air transport service at any airport. AAI may undertake various activities specified in Section 12 (3) of AAI Act, as required from time to time to achieve the above objective such as: Plan, develop, construct and maintain runways, taxiways, aprons and terminals and ancillary buildings at the airports and civil enclaves; Establish airports or assist in the establishment of private airports by rendering such technical, financial or other assistance which the Central Government may consider necessary for such purpose; Plan, procure, install and maintain navigational aids, communic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development of certain airports of the AAI on a public private partnership basis to bring efficiency in service delivery, expertise, enterprise and professionalism and to harness necessary investment. Airport has been defined in Article 1 clause 1.1 of the concession agreement. For reference the definition of airport is defined as under: Airport means Jaipur International Airport located at the Site, and includes civil, mechanical and electrical works, the Terminal Building, Cargo Facilities, Runway and all Project Assets necessary for and associated with operation and expansion of the Airport; After evaluation of the bids received from the bidders and receipt of approval of GOI the applicant accepted the bid of Adani Enterprise Limited and issued letter of Award dated 01.09.2020 which required Adani Enterprise Limited to execute the concession agreement through a special purpose vehicle. Adani Enterprise Limited has promoted and incorporated a special purpose vehicle as Adani Jaipur International Airport Limited (herein after referred as Concessionaire) under Companies Act 2013 and in accordance with the terms of Request for proposal (REP). After receipt of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elating to or forming part of the Site including: (a) rights over the Site in the form of lease, right of Way or otherwise; (b) the Aeronautical Assets and the Non-Aeronautical Assets; (c) tangible assets such as civil works and equipment including foundations, drainage works, electrical systems, communication systems and administrative offices; (d) Project Facilities situated on the Site; (e) buildings and immovable fixtures or structures forming part of City Side Development; (f) all rights of the Concessionaire under the Project Agreements; (g) financial assets, such as receivables, security deposits, all negotiable instruments etc; (h) insurance proceeds; and (i) Applicable Permits and authorizations relating to or in respect of the Airport; In nutshell the whole airport operations which were run by the applicant would be given to the Concessionaire for the period of 50 years for agreed consideration. Concessionaire agrees to pay the Applicant (i.e. Airports Authority of India) following sum as consideration for transfer: - Rs. 2,53,00,00,000/- towards Estimated Deemed Initial Regulatory Asset Base (RAB) i.e. es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n amount to transfer of business from the applicant to the Concessionaire. As per the provisions of Section 9 of CGST Act, Central Goods and Service Tax ('CGST') is leviable on intra-state supplies of goods or services. Similarly, State Goods and Service Tax ('SGST'), is also leviable on intra-state supplies of goods and services. As per Section 5 of the IGST Act, which is the charging section, integrated Goods and Services Tax ('IGST') shall be levied on all inter-state supplies of goods or services or both. Thus, it is clear that GST is leviable on supply of goods or services. Thus, it is imperative to analyses whether the transfer of business qualifies as 'supply'. The term 'supply' has been defined in section 7 of CGST Act. Section 7 of the Act is reproduced hereunder: 7. (1) for the purposes of this Act, the expression supply includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (aa) the activities or transactions, by a person, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply g. h. Therefore, to be called as goods, it has to be movable property. As business cannot be said to be movable, transfer of business cannot be said to be a transfer of goods. Subsequently the next question arises is whether the transfer of business will come under the purview of definition of services. Section 2 (102) of the CGST Act defines 'services' as: 'services' means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged. As per the definition of services, anything other than goods is called a service. Therefore, the above transaction of transfer of business will be supply of services. It is worth noting that Section 7(1A) of the CGST Act provides a reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... understand -the meaning of word 'transfer in the above exemption entry. In general connotation transfer can be permanent as well as temporary. Union of India vs Dr. Maqsood Ahmed [AIR 1963 Bom 110, 114], wherein, the Court has held that: the work 'transfer' is a larger word and the word 'sale' is a specific word. A transfer may be by means of a lease, mortgage or sale or in any other mode. It would be worthwhile to note that whilst the definition of supply includes sale but the exemption notification does not refer to sale of going concern to be exempted. It uses the word 'transfer'. Given that there is no definition of 'transfer', two views are possible. The first view is that it could mean an outright sale. The second view could be that it may not necessarily mean outright sale because if the intention of the legislature was to exempt sale of going concern, it could have used the term sale. However, it has used the word transfer of going concern to be an exempt transaction. In the present case, there is transfer of business of operating, managing and developing of the airport for a period of 50 years as per clause 3.1.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counter party to the concessionaire within 180 (one hundred eight} days of COD. 16.2 Transfer of Non-Aeronautical Assets Subject to clause 6.3, the concessionaire shall be deemed to have assumed control of all Non- Aeronautical Assets on the COD 16.3 Transfer of Aeronautical Assets The concessionaire shall be deemed to have assumed control of all, Aeronautical Assets and Terminal Building on the COD. Further, general meaning of the word 'transfer' as well as its definition in various Acts suggests that it is not restricted to permanent transfer. The various definitions of the term transfer are summarized below for ready reference: Arms Act. 1959 Section 2(lXk) Transfer with its grammatical variations and cognate expressions, includes letting on hire, lending, giving and parting with possession. Foreign Exchange Management Act 1999 Section 2(za) Transfer includes sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien. Prevention of Money Laundering Act, 2003 Section 2(za) Transfer includes sale, purchase, mortgage, pledge, g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises is whether the above transfer is a going concern or not. Going Concern is not defined under CGST Act. However, going concern is an accounting principle which indicates that business would continue, and management is not intending to liquidate or stop business for near future. As per Accounting Standard 1, issued by the Institute of Chartered Accountants of India, the enterprise is normally viewed as a Going Concern, that is, as continuing in operation for the foreseeable future. In terms of financial transaction 'going concern' has the meaning that at the point in time to which the description applies, the business is live or operating and has all parts and features necessary to keep it in operation. Transfer of a going concern means transfer of a running business which is capable of being carried on by the purchaser as an independent business. Such transfer of business as a whole will comprise comprehensive transfer of immovable property, goods and transfer of unexecuted orders, employees, goodwill etc. It implies that the business will continue in the new hands with regularity and a nature of permanency. In the present case, the above test is satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncession agreement provides that the Company would be given a right to carry on the airport business for a period of 50 years. On completion of the tenure of the concession period, the assets and liabilities would revert back to applicant. This would also happen on premature termination due to breach of concession agreement. Thus, it is the intention of the contract that the business so transferred is intended to be carried on with regularity and with the nature of permanency during the concession period. Clause 3.1.1 and 3.1.2 of the concession agreement is reproduced hereunder; Subject to and in accordance with the provisions of this agreement, Applicable laws and the Applicable permits, the authority hereby grants to the concessionaire, the concession set forth herein including the exclusive right, lease and authority to operate, manage and develop the Airport (Concession) for the period of 50 (fifty) years commencing from the COD, and the concessionaire hereby accepts the Concession and agrees to implement the project subject to and in accordance with the terms and conditions set forth herein. 3.1.2. Subject to and in accordance with the provisions of this agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erating it under and in accordance with the AAI Act. The concessionaire has taken insurance, novated all the existing agreements as mentioned in Schedule V, so as to maintain effective running of operations of the airport. The concessionaire has entered into Memorandum of Understanding with the Government of India as per Schedule R to the said Contract. On plain reading of the contract, it is forthcoming that there are various standards specified in the Contract to ensure that the operations, development and maintenance of the said Airport is undertaken in pursuance with the AAI Act by the concessionaire. The business arrangement between the AAI and concessionaire satisfies the concept for foreseeable future. Hence it is clear that the underlying transaction involves transaction relating to a going concern for a foreseeable future. Now the third question arises is whether the transfer is a whole or an independent part thereof. In the present case the applicant is not transferring the entire business, however the applicant is transferring its independent unit i.e. Jaipur International airport. Hence, it becomes necessary to determine whether operation of the airport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concessionaire and consideration for the same has been charged on concessionaire. (f) The Article 2 of the contract wherein the scope of the Project is detailed, which includes the operation, management and development of the airport. The 'airport' also includes all project assets necessary for and associated with the operation and expansion of the airport. The project assets are physical and other assets relating to or forming part of the site including the rights over the site in the form of lease, right of way or otherwise; the aeronautical assets and non-aeronautical assets; tangible assets such as civil works and equipment including foundations, drainage works, electrical systems, communication systems and administrative office; project facilities situated on the site; buildings and immovable fixtures or structures forming part of city side development; all rights of the concessionaire under the project agreements; financial assets such as receivables, security deposits , all negotiable instruments etc; insurance proceeds; applicable permits and authorizations relating to or in respect of the airport. The Contract is self-contained to ensure that Airport busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness for a period of 50 years. On completion of the tenure of the concession period, the assets and liabilities would revert back to AAI. This would also happen on premature termination due to breach of concession agreement. Thus, it is the intention of the contract that the business so transferred is intended to be carried on with regularity and with the nature of permanency during the concession period. Attention at this stage is also invited to the international jurisprudence in this regard. a. Hon'ble Constitutional Court of South Africa in the case of Aviation Union of South Africa and Another Vs. South African Airways [Pty] Ltd and Others MANU/SACC/OO3O/2011, while interpreting the provision o, Section 197 of Labour Relations Act, it was held that transfer of operations of airport from first person to second and subsequently from second person to first amounts to transfer of business by one person to another as a going concern. b. In case of Robinson Family Limited vs. the Commissioners for Her Majesty's Revenue and Customs [2012] UKFTT 360 GC), Hon'ble United Kingdom First Tier Tribunal has held that transfer of property by way of lease for the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or promised or part-paid and part-promised. Supreme Court in the case of Kaliaperumal vs Rajagopal and anr (AIR 2009 SC 2122) has observed that 'Sale' is defined as a transfer of ownership for a price. In a sale there is an absolute transfer of all rights in the properties sold. No rights are left with the transferor. Hon'ble Bombay High Court in the case of Provident investment Co. Ltd vs Commissioner of income tax - AIR 1954 Bom 95 observed that a sale or transfer presupposes the existence of the property which is sold or transferred. It presupposes the transfer from one person to another of the right in the property. Attention is drawn to the Entry 49 of the List II of Seventh Schedule of the Constitution of India, which empowers only the state government to levy any tax on land which is produced hereunder: 49. Taxes on Land and Buildings Applicant is of the view that a long term lease for a period exceeding 30 years tantamount to Sale of the immovable property since the lessor is deprived of the right to use, enjoy and possess the property once the said lease has been granted. Further attention is also drawn to Article 30 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here with the GST Act and the tax on supply of goods and services. It is not disputed that the position of the CIDCO for the purpose of orderly planning and development will be of no assistance in the sense while developing a new township, the objective of the planning authority is not to earn money, but to develop the area so that the purpose of setting up a township is achieved by more people wanting to live in the area in lieu of the various amenities provided in the area. The CIDCO is one such authority. It is entirely for the legislature, therefore, to exercise the powers conferred by sub-section (2) of section 7 of the GST Act and issue the requisite notification. Absent that notification, merely going by the status of the CIDCO, it cannot be held that the lease premium would not attract or invite the liability to pay tax in terms of the GST Act. The applicant submits that if the monthly/ annual fees are considered to be consideration for transfer of business over and above the initial/ one time payments then the exemption shall be available and thus Navi Mumbai Builder's Association v. Union of India is distinguishable. The applicant submits that it receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employment offer is made. 46.3 The Select Employees who have declined the offer of employment or not received the offer of employment will continue their services in AAI and will be redeployed after the completion of Deemed Deputation period. 46.4 After the expiry of Deemed Deputation period if the Accepting employees are less than 60% of the Select employees which is called Deficit Employees . Deficit Employees Cost shall be pass through in determination of aeronautical charges and shall be payable until retirement or other separation from Authority's services of the Deficit Employees whichever is earlier. The deficit employees cost, if any, as raised upon by the concessionaire on the applicant is pass through i.e. only the liabilities payable by the applicant will be recovered from the concessionaire and are not in nature of any damages recovered. Further the select employees had the option to choose whether to join the concessionaire or not. However, the applicant was contractually obligated to pay the salaries and other emoluments to the select employees hired for the purpose of the operations of Jaipur airport. The applicant has merely passed ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain effective running of operations of the airport. SPV has entered into Memorandum of Understanding with the Government of India as per said contract. On plain reading of the contract, it is forthcoming that there are various standards specified in the contract to ensure that the operations, development and maintenance of the said Airport is undertaken in pursuance with the AAI Act by the SPV. It is held that this business arrangement satisfies the concept for foreseeable future. ii. Transfer of Assets and Liabilities In pursuance to this contract, all the existing security deposits, earnest money deposits, bank guarantees, performance securities or other like instruments for and in respect of the airport shall be released to the counter party by AAI upon the same being submitted by such counter party to the SPV within 180 days of CoD. Further all the liabilities arising as a result thereof of this contract shall be deemed to be the liabilities of the SPV. Further, it is opined that it is not essential to transfer all assets and liabilities for a transaction to qualify for a transfer of business. That is to say, that even if some assets are retained by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of services or both. Thus for subject transfer of business by AAI to SPV is to be termed as supply, the first and foremost condition is that business shall be either as a 'Goods' or 'Services'. [Para 24] It is found that business is not Goods for it is not a movable property and thereby transfer of business cannot be supply of goods. [Para 24.1] Prima facie from reading the section 7 [supply definition], section 2(52] [goods definition], section 2[102) [services definition], section 2[17] (business definition] CGST Act, it is not directly forthcoming if business is a service, consequently making supply of business a supply of service. For illustration, the meaning of section 2(17](d] prima facie is not forthcoming, if the word 'Business' is substituted for the word 'service'. [Para 24.4] From the construction of the wordings in the sections 18(3], 22(3] and 85(1]; Schedule 11(4] of CGST Act and the rule 41(1] CGST Rules, it is found that 'transfer of business' is more of an event in pursuance to a business arrangement. [Para 24.6] In exercise of powers conferred under section 11(1], the Central Government has issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is supply of service, it is held that subject business arrangement is supply of service as per section 7(1). [Para 25.3] AAI has not ceased to be a taxable person as AAI has only transferred its Ahmedabad Airport business to the SPV but its other business are not transferred and for such business the AAI is a taxable person and registered under GST. [Para 26.1] Schedule 11(4) CGST Act stipulates whether the transactions with respect to 'transfer of business assets' to be treated as supply of Goods or supply of services. There is no merit to draw any parallel between the 'transfer of business' which is the subject matter and 'transfer of business assets' as mentioned in Schedule 11(4) to the CGST Act. AAI has not ceased to be a taxable person. [Para 26.2] On detailed reading of the subject contract and it is found that the subject business arrangement is 'transfer of going concern service'. Thereby, no merit is found to vivisect the subject contract and examine the treatment of aeronautical assets/non-aeronautical assets/other business assets in the contract entered between AAI and SPV. The substance of the contract compels one under GS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST. [Para 29] Concession fee is a part of the consideration paid by SPV to AAI in subject matter. The consideration for the subject supply is exempt from GST vide Entry No. 2 of Notification No. 12/2017 - Central Tax [Rate], dated 28-6-2017. Further, the issue of reimbursement of staff cost has arisen in pursuance to the terms of subject contract dated 14-2-2020 wherein the 'supply of transfer of going concern service' is exempt from GST. The contract is for 'transfer of going concern service', therefore the consideration/reimbursement of cost is exempt from GST. [Para 29]. No appeal has been preferred against the aforesaid order before appellate authority of advance ruling neither by Centre nor State. In light of the aforesaid facts of the case, judicial pronouncements and relying upon the decision of Gujarat AAR, the Applicant is of the view that the said transaction is exempted by the Entry No. 2 of the exemption notification No 12/2017 - Central Tax (Rate) dated 28-06-2017. C. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT:- 1. Whether the transfer of business by the Airport Authority of India to the M/s. Adani Jaipur International A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Q.1. Whether the transfer of business by the Airport Authority of India to the M/s. Adani Jaipur International Airport Limited be treated as Supply u/s. 7 of the Central Goods and Service Tax Act, 2017 ( CGST ) viz-a-viz Rajasthan State Goods and Service Tax Act, 2017 ( RSGST )? Ans. 1 Yes, according to definition of supplies GST Act, 2017 Section 7 of CGST Act, 2017: Scope of Supply (chapter iii levy and collection of tax), For the purposes of this Act, the expression supply includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business: (aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration Explanation - For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations to the Council, hereby exempts the interstate supply of services of description as specified in column (3) of the Table below from so much of the central tax leviable thereon under sub- section (1) of section 9 of the said Act, as is in excess of the said tax calculated at the rate as specified in the corresponding entry in column (4) of the said Table, unless specified otherwise, subject to the relevant conditions as specified in the corresponding entry in column (5) of the said Table namely: Sr.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent) Condition 2 Chapter 99 Services by way of transfer of a going concern, as a whole or an independent part thereof. Nil Nil Q.4. If the answer is ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uling is sought by the applicant, and relevant facts. We would like to discuss the submission made by applicant and will take up the above question for discussion one by one. 2) The applicant i.e. Airports Authority of India (the 'AAI') is the authority created under the Airports Authority of India Act, 1994 (the 'AAI Act'). AAI Act was enacted to provide for the constitution of the AAI for the better administration and cohesive management of the airports. AAI has been created for the purposes of establishing or assisting in the establishment of the airports and for matters connected thereto. 2.1) applicant has decided to invite bids for undertaking the operations, management and development of airport of the applicant on a public private partnership basis to bring efficiency in service delivery, expertise, enterprise and professionalism and to harness necessary investment. Airport has been defined in Article 1 clause 1.1 of the concession agreement. For your reference the definition of airport is defined as under: Airport means Jaipur International Airport located at the Site, and includes civil, mechanical and electrical works, the Terminal Building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Airport as on 31st March 2018. (As per Clause 28.12.1 and 28.12.2) which is subject to adjustment as per Clause 28.12.3 and 28.12.4 of the Concession Agreement. (onetime payment) Actual amount incurred by AAI in respect of contracts relating to Work-in-Progress as on the Commercial operation Date (''COD') as per Clause 6.4.5 of the Concession Agreement. Reimbursement of salaries incl. of other cost paid to employees of AAI having designation of Asst. General Manager and below during the Joint Management Period and deemed deputation period as per Clause 6.5.4 of the Concession Agreement. Subject to the select employee cost i.e. clause 6.5.4 of the concession agreement the concessionaire shall pay the amount as indicated in invoice raised by applicant towards emoluments of the select employees as per clause 6.5.5 of the Concession Agreement Monthly concession Fee during the concession period shall be paid to the applicant calculated as under: (Per Passenger Fee for international Passengers * International Passenger Throughput for that month) + (Per Passenger Fee for Domestic Passengers * Domestic Passenger Throughput for that month) The mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the definition of business. Hence we observe that the activity of transfer of business is in the nature supply and falls under the Sec. 7(1) of CGST Act, 2017. 3.3) We would like to refer the definition of Goods in CGST Act, Section 2 (52) CGST Act, defines Goods as follows: goods means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply. In light of above definition, we observe that business is not Goods for it is not a movable property and thereby Transfer of Business cannot be supply of goods. Furthermore, on going through the definition of Service, Section 2(102) CGST Act, which defines Service as follows: services means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged. We observe Business' may be covered under the umbrella of the definition of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer of employees as requisite to carry on the business without interruption. In effect, it implies that the business will continue in the new hands with regularity and a nature of permanency. 4.4) In accordance to submissions made by the applicant, it has been observed that The Airports Authority of India has decided to invite bids for undertaking the operations, management and development of certain airports on a public private partnership basis under Section 12A of AAI Act, 1994. Applicant while prescribing technical and commercial terms and conditions for operations, management and development of the Jaipur International Airport (herein after referred as Airport ) invited proposals by Request for proposal (RFP) dated 14.12.2018. After evaluation of the bids received from the bidders and receipt of approval of GOI, the applicant accepted the bid of M/s Adani Enterprise Limited and issued letter of Award dated 01.09.2020 which required M/s Adani Enterprise Limited to execute the concession agreement through a special purpose vehicle. Adani Enterprise Limited has promoted and incorporated a special purpose vehicle company as Adani Jaipur International Airport Limited (herein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations, management and development of the Airport . 4.7] We have gone through some of the article of this agreement wherein we observes that as per Article 16.2 and 16.3 of the agreement, the SPV shall assume control of all Aeronautical Assets, Non Aeronautical assets and Terminal Building on the commercial operation date [hereinafter referred as 'COD']. Further, we find that as per Article 16.1.1 of the agreement, all revenues, receipts, expenditure and other financial transactions for and in respect of the Airport shall be deemed to be transferred from the AAI to SPV on COD and all rights, obligations and liabilities in respect thereof shall vest exclusively in the SPV until the transfer date. 4.8] We find that as per Article 16.1.2 of the agreement, all the existing security deposits, earnest money deposits, bank guarantees, performance securities or other like instruments for and in respect of the airport shall be released to the counter party by AAI upon the same being submitted by such counter party to the SPV within 180 days of commercial operation date. Further we find that all the liabilities arising as a result thereof of this contract shall be deemed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vides Advance Ruling No Up ADRG-03/2022 dated 13/05/2022 passed ruling that the business arrangement between AAI and SPV merits to be covered under transfer of going concern. 4.16) Thus, we are of the view that the business arrangement between AAI and SPV vide Concession Agreement dated 16.01.2021 is squarely covered under transfer of going concern. 5.) The other part of question is whether the transfer of business by Airports Authority of India to M/s. Adani Jaipur International Airport Limited is covered in clause 4 of schedule II of CGST Act viz-a-viz RSGST. The clause 4 of schedule II of CGST Act is as under-: 4. Transfer of business assets (a) where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person; (b) where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services of description as specified in column (3) of the Table below from so much of the central tax leviable thereon under sub- section (1) of section 9 of the said Act, as is in excess of the said tax calculated at the rate as specified in the corresponding entry in column (4) of the said Table, unless specified otherwise, subject to the relevant conditions as specified in the corresponding entry in column (5) of the said Table namely:- Sr.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent) Condition 2 Chapter 99 Services by way of transfer of a going concern, as a whole or an independent part thereof. Nil Nil 6.2) We observes that in exercise of powers conferred under Section 11(1) CGST Act, the Central Government has issued Notification 12/2017-CT(R) dated 28-6-2017, wherein at serial no. 2 of said Notification, reads the description of service as 'Services by way of transfer of a going concern, as a whole or an inde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... personnel, as per para 6.5.3 (i), on the expiry of such 03 month period shall be transferred out of the airport and redeployed by the Authority. Hence in this regard there is no case of GST on payment of salary. But the para 6.5.4 says that the Concessionaire shall bear the Select Employee cost of the Joint Management period and Deemed Deputation period. 11.2) we have gone through the conditions and arrangements made for applicants employees in agreement which has been mentioned in earlier paras as well as submitted by applicant in his submission. A perusal of above conditions clearly stipulates that the Select Employees, who are appointed and deployed by the AAI, are not part of the transfer of business as a whole till the time they are absorbed in and by the recipient SPV because their absorption in the new entity is conditional to acceptance of offers of employment by the employees of AAI. As such, the emoluments paid to employees of AAI till their acceptance of employment offers, is not governed by the tenets of transfer of business as a going concern. 11.3) We observes that points of agreements that payment of salary or emoluments of staff is onus of applicant i.e. AAI. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the next question of applicant, We observes that the reimbursement of municipal tax, property tax and water charges has occur in light of the terms of Concession Agreement dated 16.01.2021 and falls under the Supply of Transfer of Going concern Service', which is exempt from GST as discussed earlier. 13) We observes on the next question regarding any reversal of ITC under section 17 (2) / (3) of CGST Act viz-a-viz RGST Act that AAI is providing services by way of transfer of a as a going concern which is exempt supply in light of Sl.No. 2 of Notification 12/2017 of CGST Act 2017 Further, as per sec. 17 read with rule 42 of CGST Rules, 2017, in case any registered person is having any exempted supplies, then ITC pertaining to such exempted supplies shall be reversed proportionately. In view of above discussion we rule as under In view of the foregoing, we rule as follows: - RULING (Under Section 98 of the Central Goods and Services Tax Act, 2017 and the Rajasthan Goods and Services Tax Act, 2017) Q. 1 Whether the transfer of business by the Airport Authority of India to the M/s. Adani Jaipur International Airport Limited be treated as Supply u/s. 7 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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