India's #1 GST software

1 click autofill GSTR-3B with G1 and 2B data

Download 2B data for multiple months in < 2mins

GSTR-2B vs purchase matching in under 1 min

OR
India's No 1 GST software

Save upto 7% in taxes

Claim 100% ITC and save ~4% GST

3x faster experience

Save 2 man days every GSTIN month

Easy to connect

Connect with 100s of ERP's, import data error-free

Slump sale under GST

Updated on: Jun 2nd, 2021 - 8:34:21 AM

5 min read

social iconssocial iconssocial iconssocial icons

Slump sale is not defined under GST law. It simply means ‘transfer of a business as a going concern’ to cover all the transactions of business transfer.

What is a slump sale?

Slump sale is one of the methods of business restructuring. Under this method, certain assets and liabilities are sold together for a lump sum sale consideration without determining the individual values of assets and liabilities sold.

Is slump sale liable to GST?

Under GST, supply includes the supply of all types of goods and services such as sale, transfer, lease, rental, license, barter or disposal made for a consideration by one person to another in course of furtherance of business. It is an inclusive definition. Thus, the scope goes beyond the course of furtherance of business. So, from the above definition, we can say that slump sale is considered as supply under GST.

Schedule II of the CGST Act: It talks about activities that are treated as a supply of goods or services. Here clause 4 says that transfer of business assets is considered as supply of goods.

However, as per clause 4(c) transfer of a business as a whole and as a going concern is not considered as a supply of goods.

Notification No.12/2017- Central Tax (Rate): As per this notification, services by way of transfer of going concern as a whole or part thereof is exempt from GST.

By way of this notification, the Revenue has clarified that transfer of a business as a going concern is exempt from GST. But, the term going concern is not defined anywhere under GST.

The notification says that the activity of business transfer as a going concern is considered as supply of service and the same is exempt from GST. Similarly, Schedule II of the CSGT Act excludes the transfer of a business as a going concern as the supply of goods but includes the transfer of business assets as the supply of goods.

From above, we can interpret that

  • Transfer of business assets- Considered as the supply of goods.
  • Transfer of business- Considered as the supply of service
  • Transfer of business as a going concern- Considered as the supply of service and exempt from GST as per above notification.

Advance Ruling with regard to a slump sale under GST

Karnataka Authority for Advance Ruling in case of M/s Rajshri Foods Private Limited

Facts: The applicant had three manufacturing units and intended to sell one of them along with fixed assets like land, building, plant and machinery, current assets and liabilities for a lump sum consideration. Below questions were raised:

  • Whether the transaction would be considered as supply of goods or supply of services or both?
  • Whether the transaction is covered under notification no. 12/2017-Central Tax?

Analysis:

  • Here one of the units is being sold as a whole. The transaction involves the transfer of all assets as well as liabilities to the buyer and the said unit is fully functional. The entire business is transferred and not just specified business assets. Considering Schedule II, clause 4(c) transfer of the entire business is not considered as a supply of goods.
  • Notification 12/2017 says that the transaction of transfer of going concern is considered as supply of service and the NIL tax rate is applicable on the same.

Ruling: 

  • The transfer of a business as a whole for one of the units of the applicant in nature of going concern is considered as supply of service.
  • It is covered under notification no.12/2017- Central tax(rate)  subject to the condition that it is a going concern.
inline CTA
India’s Fastest and Most Advanced 2B Matching
Maximise ITC claims, use smart validations to correct your data and complete 2B matching in <1 minute
CONTENTS
;

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company PolicyTerms of use

ISO

ISO 27001

Data Center

SSL

SSL Certified Site

128-bit encryption