The Chhattisgarh Authority of Advance Ruling ruled that the sale of Biomass Power Plant as a going concern is supply of goods and is liable to Goods and Services Tax (GST).
The applicant, M/s Shikhar Commodities acquired the biomass power plant of 8 MW capacity of M/s Vandana Vidyut Limited. Applicant has emerged as successful H1 bidder for the above plant through e-auction conducted by the liquidator appointed by National Company Law Tribunal under Insolvency and Bankruptcy Code 2016.
As the applicant emerged as a successful H1 bidder, the liquidator informed that the GST amount will be charged on the final bid amount. However in response the applicant stated in the reply letter that the transaction is ‘Supply of service’ and exempted from the charge of GST.
The applicant submitted that the basis of taxation under the Goods and Services Tax Act revolves around ‘supply’. A slump sale (sale of a unit as a whole) would also be a supply and hence fall under the purview of GST.
Furthermore, the supply would be in the nature of ‘transfer as a going concern’ and such a transfer attracts a ‘Nil’ rate of GST as per Sl.No.2 of the Notification No. 12/2017- Central Tax (Rate).
The applicant further sought the Authority to rule in their favour and exempt/NiI rate the sale of the insolvent / Corporate Debtor M/s Vandana Vidyut Limited unit from GST, which is to be regarded under the GST Act as a service supply by way of transfer of a going concern and will be exempt/NiI rated levy.
The authority remarked that the notification as outlined in Sl.No.2 of Notification No. 12/2017- Central Tax (Rate), will only be acceptable for the transfer of a firm as a going concern when the transfer is a service supply and not a sale of goods.
Furthermore, it was noted that if the transfer of business as a going concern involves a supply of sale of assets that merits treatment as a principal supply as described above, the sale of assets as a going concern will not be treated as a supply of goods under the terms of Notification No.12/2017- Central Tax (Rate), and it will not be eligible for the services of transfer of business as a going concern.
The bench of Sonali K. Mishra and Rajesh Kumar Singh further noted that the applicant appears to have incorrectly claimed eligibility towards exemption from GST under serial no. 2 of Notification no. 12/2017-Central Tax (Rate) by mischaracterizing the sale of a biomass power plant by way of sale as a going concern as a supply of services when the same is supply of goods by way of transfer as a going concern.
Therefore, based on the information provided by the applicant, the authority arrived at the conclusion that the applicant’s current transaction is not covered by Notification No. 12/2017- Central Tax (Rate) 2017 Supply of Goods and is subject to GST at the applicable rate.
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