Capital Assets with Transferring Running Business will Attract GST: AAR

The Authority of Advance Ruling (AAR), Andhra Pradesh, has held that GST will be applicable on a transfer of any running business to another state along with the capital assets for a monetary consideration. The ruling was provided by the authority in the case of the applicant, Shilpa Medicare Limited, dealing in the business of R&D (Research and Development) of Active Pharmaceutical Ingredients (APIs) and formulation of molecules and manufacturing of formulation, for R&D purposes, in small quantities.

The applicant is transferring the Andhra Pradesh unit of Shilpa Medicare Limited to the Karnataka unit of the same for a financial consideration. The

Authority of Advance Ruling (AAR)

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said that GST applies on such a transfer as the monetary consideration amounts to the supply of service, and GST applies to such services, so GST will be charged on the transfer of such services. Moreover, the applicant has not submitted sufficient evidence that clears that the transaction is a going concern as such. The authority has only been provided with a categorical declaration in the application.

Firstly, the applicant sought the ruling of the AAR as to whether such a transfer will be categorized as a supply of goods or a supply of services or a

supply of goods and servicesGet to know GST provisions and rules on the free supply of goods. Also, we have included rules regarding ITC reversal on free supplies of goods and services

. The bench of AAR, with D. Ramesh and M. Shreekanth as members, held that the transfer of business, along with capital assets, will be categorized as a supply of service.

Secondly, the applicant also wanted the ruling of the AAR as to whether such transfer of business will be covered under Sl.No.2 of the Notification No.12/2017 – Central Tax (Rate) dated June 28, 2017, and the AAR held that the transaction is covered under the notification. And thirdly, the applicant wanted to know whether he is required to

file the GST returns

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under form GST ITC-02 before transferring the unutilized ITC (Input Tax Credit) from the Vizianagaram, Andhra Pradesh unit to the Bengaluru, Karnataka Unit, on which the AAR has approved the applicant to do so.

View and Download Andhra Pradesh AAR No. 05/2020