In re Shiv Shankara Health Care Enterprises (GST AAR Tamilnadu)
Whether the goodwill paid to the partners at the time of retirement is liable to be taxed under GST Act.
We have carefully considered the application, various submissions of the applicant, remarks of the jurisdictional officers and the request for withdrawal made by the applicant. The issue on the applicability of GST on the ‘Goodwill’ extended by the applicant to the retiring partners can be arrived at only after analyzing the details as to how the goodwill was arrived at and the related accounts which have not been furnished by the applicant. The applicant for the reasons that their consultants are not available has requested for withdrawal of the application. In this scenario, we find that the withdrawal is to be permitted as the issue cannot be decided based on the submissions made by the applicant. Therefore, withdrawal is permitted without offering any observation/comment on the admissibility of the application under Section 97(2) of the TNGST/CGST Act 2017 and the applicability of the GST on the ‘Goodwill’.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, TAMILNADU
Note: Any appeal against the Advance Ruling order shall be filed before the Tamil Nadu State Appellate Authority for Advance Ruling, Chennai under Sub-section (1) of Section 100 of CGST ACT/TNGST Act 2017 within 30 days from the date on which the ruling sought to be appealed against is communicated.
At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act.
SHIV SANKARA HEALTH CARE ENTERPRISES, Raguvel Towers, First Floor, No.18, Nedunchezhian Street, Manali, 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 1/31(t each. They have stated that the above partnership was modified and the following two partners were admitted in addition to the existing partners vide partnership deed dated 15/10/2010 with effect from the same date and with profit sharing ratio of 20 % each- a) D. KARPUKKARASI ; b) V. RANI. The applicant has stated that as per Deed of Retirement dated 30/03/2019 it was decided that with effect from 31/03/2019 the newly admitted partners: a) Mrs. D. KARPUKKARASI & b) Mrs. V. RANI will be retired from the partnership and the other three partners will continue as “Continuing Partners”. It was agreed by the continuing partners that the retiring partners will be paid a consideration of Rs. 1,40,00,000/-each in total. The break-up of the consideration is as under:
