Sale of a going concern by a business
house will not attract Goods and Services Tax (GST), as per an order by the
Authority for Advance Ruling (AAR).
The Karnataka bench of the AAR gave its
ruling based on an application filed by Rajashri
Foods Pvt Ltd which wanted to sell one of its units along with fixed and
current assets as well as liabilities, including bank loans, for a lump sum
consideration.
The AAR said that as per a government
notification, any transfer of a going
concern constitutes a ‘supply of service’ and ‘nil’ tax rate will apply on it.
A going concern is a concept of
accounting and applies to the business of the company as a whole. Transfer of a
going concern means transfer of a running business which is capable of being
carried on by the purchaser as an independent business.
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