In re Vivek Hetamsaria (GST AAR West Bengal)
Summary: The West Bengal Authority for Advance Ruling considered the proposed transfer of the entire proprietorship business of M/s Ambika Diamond, owned by Vivek Hetamsaria, to M/s Ambika Jewelvista LLP, in which the proprietor is a partner. The proposed arrangement contemplated transfer of the entire business as a going concern, including fixed assets, closing stock, receivables, deposits, cash balances, employees, business rights, liabilities and other obligations, without consideration, with continuation of the business under the LLP. The Authority examined whether the transaction constitutes a supply, whether it is a supply of goods or services, whether it is covered by Serial No. 2 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, and the treatment of stock and assets if that exemption does not apply. The applicant relied on the statutory framework, including Section 7, Section 7(1A), Sections 18(3), 22(3) and 85, Schedule I and Schedule II and Rule 41, as well as advance rulings concerning transfers of businesses as going concerns. The Authority held that the transfer of the business, even without consideration and not in the usual course of business, is a supply under the GST Acts. It further held that the transaction is a supply of services, relying on Schedule II and, in particular, the treatment of a business transferred as a going concern. The Authority then examined the concept of a going concern, noting that the CGST Act does not define the expression and referring to common parlance and financial standards. It reproduced Serial No. 2 of Notification No. 12/2017-Central Tax (Rate) providing a Nil rate for services by way of transfer of a going concern, as a whole or an independent part thereof. However, the Authority found that the applicant had not furnished documentary evidence establishing that the business was a going concern. The representative had stated during personal hearing that the business was running and GST returns were regularly filed, but the Authority stated that it was not in a position to determine whether the business qualified as a going concern. Accordingly, it ruled that the exemption would apply if the business qualifies as a going concern by all standards. If it does not qualify, the transfer of stock of goods, closing stock of assets and similar items would be treated as supply of goods under Entry 4(c) of Schedule II and taxed at the applicable rate. The ruling therefore answered the first two questions affirmatively in favour of supply and supply of services, made the exemption conditional upon qualification as a going concern, and prescribed the alternative goods treatment where that condition is not satisfied. The Authority also referred to Cosmic Ferro Alloys Limited, Jayesh Popat, Rajashri Foods Pvt. Ltd. and Airport Authority of India in considering the treatment of business transfers as going concerns.
