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February 20, 2023
By
Paramita

Will Slump Sale Attract GST?

Slump sale is a common term used in the business world, which refers to the transfer of one or more business undertakings to another entity as a going concern. It is a common practice in mergers and acquisitions, where the buyer acquires the entire business operations of the seller. The question that arises in this regard is whether a slump sale will attract GST or not.

Goods and Services Tax (GST) is a value-added tax levied on the supply of goods and services in India. It is a comprehensive indirect tax that has replaced multiple indirect taxes such as excise duty, VAT, and service tax. GST is applicable on all types of supplies, including the transfer of business undertakings.

Slump sale is considered as a transfer of a going concern, which is specifically defined under the GST law. As per the definition, a going concern means any business which is being carried on by a person and includes all tangible and intangible assets of the business, whether or not transferred with the business.

Therefore, based on the definition of going concern, it can be concluded that slump sale will attract GST as it involves the transfer of a business as a going concern. The transfer of business as a going concern is treated as a supply of goods or services under GST, and hence it attracts GST.

However, there are certain exemptions provided under the GST law in case of a transfer of a going concern. As per the GST law, the following transactions of a going concern are exempt from GST:

  • Transfer of a business or a part thereof by way of a slump sale to a registered person, subject to certain conditions;
  • Transfer of a capital asset or a stock-in-trade from one registered person to another registered person in case of a merger, demerger, amalgamation, or a similar restructuring of two or more entities;
  • Transfer of a business or a part thereof by way of a gift or will;
  • Transfer of a business or a part thereof to a private limited company or a public limited company or a limited liability partnership, subject to certain conditions.

Therefore, if the transfer of a going concern satisfies the conditions mentioned above, it will be exempt from GST. However, if the transfer does not satisfy the conditions, it will attract GST.

It is important to note that the transfer of business as a going concern is a complex transaction, and it is advisable to seek professional advice before entering into such a transaction.

Conclusion

Slump sale is a transfer of one or more business undertakings to another entity as a going concern. As per the definition of going concern under the GST law, the transfer of business as a going concern attracts GST. However, there are certain exemptions provided under the GST law in case of a transfer of a going concern. It is advisable to seek professional advice before entering into a transaction of a going concern to ensure compliance with the GST law.

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