Facts of the case:
1. The Applicant is a is a partnership firm engaged in the business of constructing residential/ commercial complexes and got an approval from the competent authority to construct certain numbers of residential/commercial complex in a particular place and accordingly the applicant started construction.
2. During the course of business the applicant has completed certain flats and due to some inconvenience the applicant, not able to complete the project and intended to transfer the total project to another person and for which it had entered a contract with another business entity for transfer of the project/business as a “going concern” wherein the main asset of the business is land and for sale of incomplete flats a separate sale deed was executed as required under the state law.
1. Taxability for the activity of sale/transfer of uncompleted flats by the applicant as part of transfer of going concern ?
Findings of AAR:
2. 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. Thus Transfer of a going concern’ in a simple way can be describe as transfer of a running business which is capable of being carried on by the purchaser as an independent business.
3. As per internationally accepted guidelines (applicable to the case in hand) issued by His Majesty’s Revenue & Customs (HRMC) to treat transfer of business as a going concern are as under:
4. The applicant is carrying on the business of constructing residential/commercial complexes and selling thereof and the applicant firm come into existence particularly for the said project. As per the sale deed the applicant has sold the under-construction building, as a whole, with its all assets and transfer the rights of the same to the buyer including the approved map from the competent authority. The buyer has purchased the under-construction building/business to carry on the same kind of business as the purchaser themselves engaged in constructing residential/commercial complexes and selling thereof. And accordingly it can be concluded that the applicant has transfer the business as a going concern which is a supply of services.
5. The transfer of Business in question shall be treated as a going concern and is exempted from GST as on date in terms of serial no. 2 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (as amended from time to time).