Transfer of under Construction Project do not attract GST: AAR
- Jun 5, 2020 | Divita S Gupta
The Authority for Advance Ruling in the State of Uttarakhand has issued a ruling that construction companies opting for transfer of under-construction projects under ‘Business Transfer Project’ are exempted from paying the Goods and Services Tax.
The applicants who are a construction firm sought for an advance ruling on the issue whether a business transfer agreement which allows transferring an under-construction building project is covered under Sr. No. 12 of the Notification No. 12/2017 Central Tax (Rate) and is thereby exempt from the applicability of Goods and Service Tax.
The Authority for Advance Ruling in the State of Uttarakhand has referred to the definition of the term “business” and has stated that acquisition of goods or services for the commencement of a business is covered under the definition of the term “business”. As such the transfer of a business as a going concern falls under the definition of the sale of a business including its assets. In this context, going concern refers to that point in time under which the description applies, the business or live or is operating and has all the assets to keep that necessary operation going.
In simple words, the transfer of a going concern can be described as the transfer of a currently running business which is capable of being run by the purchaser or purchasers as an independent business after being purchased.
In this particular case, the applicants had sold the under-construction project along with all its assets and transferred the rights to the buyer. The buyer purchased the under-construction project and continued to carry out the same kind of construction work. As such, the transfer of the business as a going concern may be treated as a supply of services and as such is exempted under the Goods and Services Tax.