Slump sale means sale of an undertaking for a consideration without assigning values to individual assets and liabilities. We were asked by one of our readers if slump sale attracts GST. When we tried to look through some of the FAQs answered on on the Central Board of Indirect Taxes and Customs website we see that the department view is it attracts GST. Below however is our answer to this query.
Slump Sale should not attract GST.
Reasons: Section 7 of the GST Act which defines scope of supply refers to activities and transactions specified in Schedule II in order to remove ambiguity on taxability of these activities. One of the various transactions mentioned in this schedule include transfer of business assets. The section explains that where goods forming part of assets of business are transferred or disposed off as no longer forming a part of that business, such transfer or disposal is to be considered supply of goods by the person. Where a person ceases to be a taxable person, any goods forming part of assets of business carried on by him shall be deemed to be supplied in the course or furtherance of his business immediately before he ceases to be a taxable person. However if the business is transferred as a going concern to another person, such transfer will not be treated as case a supply of goods. If we look at the provision in detail, the transferee in such case would be the carrying on the business as was carried on in the past by the transferor. From GST perspective goods/ services created from the assets purchased would continue to be taxed as before and hence we feel slump sale transaction being similar in nature to the exception mentioned above should not be subject to GST.
Author Bio
Seems debatable.