B. M. Industries – 2019 (22) G.S.T.L. 293 (A.A.R. – GST – Haryana)

Merger of a firm with the Private company is not termed as ‘Supply’

Facts: In the case, the applicant is a proprietorship firm involved in manufacturing and sale of aluminium profiles proposed to merge as a going concern with Bimal Aluminium Pvt Ltd., another firm of the same city. Consequent to the merger, the applicant firm will not exist anymore and all its liabilities, assets, rights and claims will be taken up by Bimal Aluminium Pvt. Ltd. All future liabilities of GST, as and when arise, shall be met by M/s Bimal Aluminium Pvt. Ltd., in normal course of business.

Issue: Whether applicant is liable to pay tax under the CGST/SGST Act, on merger of his proprietorship firm as a going concern with a private limited company on the fixed assets and currents assets including stocks of raw material, semi-finished and finished goods.

Held: The AAR of Haryana stated with reference to Section 7 as under:

The applicant, on merger of his proprietorship firm as a going concern with a private limited company, is not liable to pay tax under CGST/SGST Act 2017 because with reference to Section 7 of the CGST Act 2017 which defines “the scope of supply” as per sub section 1, the supply includes sale, transfer, barter, exchange made for a consideration in the course of or for furtherance of business. The transfer of the applicant’s business as a going concern to a private limited company is not in the ordinary course of business or for the furtherance of business. The selling of business is not the business of the applicant. It, in fact, cannot be called a transaction in the normal course of business or for furtherance of business. It is an extraordinary activity which shall bring the business to an end in the hands of the applicant although it will continue to operate with regularity and permanently in the hands of the buyer i.e. M/s Bimal Aluminium Pvt Ltd.

Therefore, the activity cannot be termed as supply as per Section 7 & hence exempt from the payment of tax.

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