Allowed

AAAR/AP/07(GST)/2020 of Deputy Commissioner of Central Tax, Division-Vizianagaram, Andhra Pradesh in case of M/s. Shilpa Medicare Limited

GST AAAR10 Nov 2020AAAR/AP/07(GST)/2020

Case brief

AI extract

What is this about?

The appellate authority set aside the Advance Ruling which classified the transfer of business as a supply of services. The court held that since the parties share the same PAN, they are distinct persons under GST law, making the transfer a deemed supply of goods. Consequently, the transfer of input tax credit between the units is not permissible, and the transaction is taxable as supply of goods.

What did the court decide?

The Advance Ruling is set aside; the transaction is treated as supply of goods; permission to transfer ITC via Form ITC-02 is denied.

AAAR/AP/07(GST)/2020 of Deputy Commissioner of Central… — GST and Indirect Tax | GST AAAR (2020)

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wi:{]rlrl 31q'g

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BEFORE THE APPELLATE AUTHORITY^{FOR ADVANCE RULING} for the State of Andhra Pradesh^(Goods and^{Service Tax)}

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(Office at O/o Chief Commissioner of State Tax, Govt. of A.P.,^{D NO} 5-56,^Block-B, R.K.Spring Valley Apartment, Bunder Road,^{Edupugallu, Vijayawada,} Andhra Pradesh - 521151-)

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Present:

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Sri PEEYUSH KUMAR^{(Member) (State Tax)}

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Sri NARESH PENUMAKA (Member)^(Central Tax)

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The 1Oth day of November, 2O2O

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order /AAAR/AP/ 07(GST) /2020

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1	Nameandaddr appellant €ssofthe	TOeputy CommissionerofCentralTaxin I^{caseofM/s.Shilpa Medicare Limited,} I^{VizianagaramCentralGSTDivision,Nei} I^{DandumarammaTemple,Cantonment} I^{Area,Vizianagaram-535003,Andhra} I^Pradesh.
2	GSTIN -F L	:znnocSezaenrzn ..--..- --
3	Dateoffilingof ARA-03 'FormGST
4	DateofPersonal Hearing	zo.ro,zozo
5	AuthorizedReprese sentative	_ IDeputy Commissioner^(CentralTax), I^{Vrzranagaram.}
6	JurisdictionalAut Centre	I CGSTVizianagaramDivision. r_

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(Under Section 1O1 of the Central Goods and Service Tax Act and the

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Andhra Pradesh Goods and Service Tax Act)

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The Deputy Commissioner of Central Tax, Vizianagaram Central GST Division (hereinafter referred to as appellant) filed an appeal in case of M/s. Shilpa Medicare Limited, Modavalasa Village, Denkada Mandal, Vizianagaram as^per Rule 106(2) of CGST Rules 201,7 against the Advance Ruling issued under subsection (6) of section 98 in FORM GST ARA-03 and no fee shall be^payable by the appellant for filing the appeal, The appeal dated; 25.08.2020 is filed contending the Ruling passed by the Authority for Advance Ruling, A,P vide Ruling AAR NO. 0S/AP/GST12020, Dated 24.02.2020.

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1. Back Ground of the Case:

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The appellant i.e., Deputy Commissioner of Central Tax, Vizianagaram Central GST Division filed an application in Form GST ARA-03 on 25.08.2020 before the Appellate Authority for Advance Ruling, Andhra Pradesh seeking clarification in

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case of M/s. Shilpa Medicare Limited, Modavalasa Village, Denkada^Mandal, Vizianagaram.

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M/s. Shilpa Medicare Limited undertakes Research & Development workⁱⁿ Active Pharmaceutical Ingredient^(API) & formulation^{molecules & manufacture} of formulation products in small^{quantity for R} &^{D purpose.}

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R&D centre is involved in formulation & Analytical^{developmentand also} method validations for analytical tools. Formulation^{researchcentreis} concentrated in developing generic equivalents and^{super genericsto} reference listed Drugs for Global Market like USA,^Europe and^{Row for} injectable and oral formulations used for the treatment of cancer^{and other} indications like Multiple sclerosis, Hypertension, CNS disorders,^{Anti-Diabetics,} Myasthenia gravis, Ogilvie syndrome, Ulcerative colitis urinary^{retention, liver} diseases, HIV, smoking cessation, Alopecia, and^{eye disorders etc.}

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It was mentioned that the whole business of^M/s. Shilpa^{Medicare Limited} unit, Vizianagaram, Andhra Pradesh - 53 LL62 vide GST No, 37AADCSB788F1ZR, is being shifted to M/s. Shilpa^{Medicare Limited,} Bengaluru, Karnataka - 562117, vide GST No.29AADCS8788F1ZO,^{as a going} concern.

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M/s. Shilpa Medicare Limited unit, Vizianagaram, stated that^{the GST returns} for the month of Jan-19 were filed with input Credit balance as^{below, as on} 29.O7 .2019 ; In put IGST-2, 29,24,1 18.00, In^put CGST-SO, 50,789.00 and^Input sGST-35,40,668.00.

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Questions raised by the M/s. Shilpa Medicare Limited unit,^beforethe Authority for Advance Ruling are:

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Whether the transaction would amount to supply of^goods or supply of services or supply of Goods & Services?"

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Whether the transaction would cover Sl.No.2 of the Notification No.1212017 - Central Tax (Rate) dated 28.6.2Ot7?

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Can we file GST ITC-02 return and transfer unutilised ITC from Vizianagaram, Andhra Pradesh unit to Bengaluru, Karnataka Unit?

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The Authority for Advance Ruling clarified that,

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The transaction would amount to supply of services.

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The transaction would cover Sl.No.2 of the Notification No.12/2OL7 - Central Tax (Rate) dated 28.6.2OL7.

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Ruled in affirmative that GST ITC-02 return can be filed.

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Being aggrieved by the ruling of AAR, the appellant approached the appellate authority under the following grounds.

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2. Grounds of Appeal:

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2.1. With reference to Question No. 1 of Application of AAR i.e.,^"Whether the transaction would amount to supply of goods or supply of services or supply of goods & services?" the appellant disagrees that it does not fall under the category of supply of services.

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2.2 Reference^{is invited to para-4 (c) of the Schedule I1 of CGST Act' 2017'} which reads^asunder:

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,,whereanypersonceasestobeataxablepersontanygoodsformingpartof the assets^{of any businesscarried on by him shall be deemed to be supplied} byhiminthecourseorfurtheranceofhisbusinessimmediatelybeforehe ceases to^{be a taxable person'| unless-}

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i) the business^{is transferredas a going concernto anotherperson; or}

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ii) the business^{is carried on by a personal representativewho is deemedto a} taxable Person."

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Reading of^{the abovestatutoryprovision infers that the business when} transferred^{as a going concern to "anotherperson"would only disqualify the} activity as^{supplyof goods. However, in the instant case sincethe transfer of} the business^{as a going concern is carriedout to a distinctbut same person"} in terms of^{section2(g4) of GGST Act, 2Ot7 i.€., M/s. ShilpaMedicare} Limited,PlotNo.29-A5,AvverahallilndustrialArea,Bengaluru,(Bengaluru) Rural, Karnatak^a-562L17 ,^{as a goingconcernhaving GSTIN:} 29AADC8788F7ZO^{but not to anotherperson.As M/s' shilpa Medicare} Limited, Survey^{No. 2017, Modavalsa village, DenkadaMandal, Vizianagaram'} Andhra Pradesh-5^{3tL62 havingGSTIN 37AADCS8788F1ZRare holders of the} same PAN, they^{are distinct but same persons in terms of section 2(Ba) of} CGST Act, 2Ol7^{and M/s. ShilpaMedicare Limited,Bengalurucannotbe} treated as another^{person. so the provisionsof Para a(c) of Schedule II of} GGST Act, 2OL7 do^{not apply in this case. Hence, it cannot be treated as} supply of services.^{Moreover, as per the AAR order No.oS/AP/GST/2020dated} 24.OZ.2OZO, it was enunciated^{that the applicant had not submitted any} documentary evidence^{to establish that the transactionis a going concern} except for his categorical^{declaration in the application as such.Hencethis} office cannot conclude^{beyond doubt that the businessis transferredas a} going concern.

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2.3. As per the GST registration^{details available with this officeas on date,the} pAN in registration details of the applicant remained the same. Hence the appellant is of the opinion that^{there is no change in the constitutionof} business of the aPPlicant.

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2.4. As discussed in AAR Order^{No.05/APIGST/2020dated24.O2.2O2O,it was} opined that the activity of transfer of^{business is made for a consideration,} but neither in course of business^{nor in furtherance of business.This office} has addressed 2(two) letters^{vide C.No. IV/16/5812020-GSTAppeals /LO1.l} dated 24.7.2O2O and C.No.IV/16/58/2OzO-GST-Appeals/1025^dated 30.7.2O2O seeking details of^{consideration,proof of consideration,copiesof} purchase invoices against which ITC is^{availed, nature and description of} outward supplies. However as^{on 20.08.2O2O,this office did not receive any} reply from the assesse regarding^{the proof of amount of consideration.} Hence it can be^presumed that there^{is no consideration for the above} mentioned transfer of business.

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2'5' Further this office has addressed 2(two) tetters vide c.No./16/5 8/2020GST- Appeats/1O11 dated 24.7.2O2O and C.No.IVl1 6/58/2020_ GST Appeals/1025 dated 30.7.2020, requesting the assesse to submit the copies of purchase invoices. However this office hasn't received any reply till date. Hence the eligibility of ITC or otherwise as declared by the assesse could not be established, since the assesse did not submit invoices of outward supplies' Due to reasons mentioned above, the activity cannot be categorised as supply of service. The activity may be treated as supply of Goods.

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3' with reference to question No.2 0f apprication of AAR i.€.,.,whether transaction would cover sl.No.2 of the Notification No .12/2077- central Tax (Rate) dated 28.06.2077,the appellant is of the opinion that as discussed above' since the activity cannot be categorised as supply of services, the transaction would not be covered under Sl.No.2 of Notification No.72/2ot7Central Tax (Rate) dated 28.06.2Ot7.

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4' with reference to Question No.3 of the application of AAR i.e., ..can we file GST ITC-02 return and transfer unutilized ITC from Vizianagaram, Andhra Pradesh unit to Bengaluru, Karnataka Unit?, the appellant is of opinion that the provisions relating to transfer of credit under certain circumstances are contained in section 18 of the CGST Act, 2017. Section 1g(3) of the 6GST Act, 2OL7 states that:

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"where there is a change in the constitution of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisions for transfer of tiabitities, the said registered person shatt be allowed to transfer the input tax credit which remains unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in such manner as may be prescribed.,,

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The methodology for the transfer of such credit is given in Rule 41 of the CGST Rules, 2OL7 as detailed below:

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'A registered person shatt in the event of sale, merger, de_merger, amalgamation, lease or transfer or change in the ownership of business for any reason, furnish the details of sale, merger, de-merger, amalgamation, lease or transfer of business, in F)RM GST ITC-02, electronically on the common portal along with a request for transfer of unutilized input tax credit lying in his electronic credit ledger to the transferee,,.

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4'1' The Section 18(3) of the CGST Act,2ot7 is applicable only when there is a change in the constitution of business of the registered person. The phrase "registered person" has been defined in section 2(g4) of the CGST Act, 2oL7 to mean a person who is registered under section 25 but does not include a person having a unique Identity Number. Section 25 of the CGST Act, 2OL7 mandates that every person shall be registered in every state in which he makes taxable supplies. Therefore, for Section 18(3) to be applicable there has to be a change in the constitution of business of the person registered in

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the state.^{The situations leading to a change in constitutionof the business} canbeonaccountofsale,merger,demerger,amalgamation,leaseor transferofbusiness.RulelgoftheCGsTRules,zoLTstatesthatwherea changeinconstitutionresultsinthechangeofPANoftheregisteredperson,the said^{person sha,, appry for fresh registration.The circumstances} enumeratedinsectionls(3)oftheCGSTActaretobeunderstoodastaking placewithinthesamestatesincetransferofstateGsTfromonestateto another^{is not Permissiblein law'}

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4.2IntheCGSTAmendmentAct,2ol8,aprovisionWaSmadetoenable multipleplacesofbusinessinastatewiththeSamePANtohaveseparate registrationforeachsuchplaceofbusiness.Accordingly,Rule4tAwas insertedintheCGSTRules,zotTtoprovideforFormITC-02Atoenable transfer^{of ITC from one registered person in a state to anotherregistered} personintheSamestatewiththeSamePAN.ThereisnoprovisioninGST Law to^{transferITC of the State taxes from one registered person in a state} to another^{state as State Taxesof One state cannot be used by a registered} personinanotherstate'TheFormITC-02whichisfiledbyaregistered person on^{account of change in constitutionof businessdue to sale' merger'} demerger,amalgamation,transferofbusiness,ispossibleonlywhenthe transfer^{and transferee are both in the same state since the state GST} cannot^{be transferred to another state'}

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In view^{of the above, it is respectfully prayed that the Ld. Appellate} Authority for^{advance Ruling, AndhraPradeshGoodsand services Tax,} VijaYawada^maYbe Pleased^to:

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a. To set^{aside the Advance Ruling No'05/AP/GST/2020dated24'O2'2O2O} pronounced by^{the Authority for AdvanceRuling, AndhraPradesh Goods} and Service^{Tax, VijaYawada'}

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b. Pass any^{such further or other order(s) as may be deemedfit and proper} in facts and^{circumstances of the case'}

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5. Virtual^Hearing:

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The^{proceedings of Hearingwere conducted through video conference on} 20th october^{2020, for which the appellant himself, The Deputy commissioner} (CentralTax),Vizianagaramattendedandreiteratedthesubmissions. M/s, Shilpa^{Medicare Limited also attended and presentedtheir arguments as under'} 5.1. At the^{outset it is submittedthat the appealfiled by the Departmentis solely} basedonassumptionsandpresumptionsandnotbasedontheprovisionsofLaw and hence the^{same merits to be set aside on this ground alone. In this regard it} is submitted^{that in para no 1.3 of the Grounds of Appeal,in the last sentence} the Department^{has admittedthat it is presumedview when it has stated that -} quote-^..Hence it can^{be presumedthat thereis no consideration"'"Unquote'}

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5.2. With^{regard to the other points raised by the Department,the main objections} of the DePartment^are:

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a. The assesse^{has declaredas their nature of business activity as}

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1' Scientific and Technicar consurtancy (sAC 00440125)

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2' Technicar Testing, Inspection, certification (sAC oo44o24g).

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The department observes that the assesse has mentioned in the application for Advance ruling ds, 'undertakes Research & Development work in ApI & formulation molecules & manufacture of formulation products in small quantity for R& D purpose,.

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R & D centre is involved in Formulation & Analytical development and also method validations for analytical tools. Formulation research Centre is concentrated in developing generic equivalents and super generics to Reference listed Drugs for Global Markets like USA, Europe and Row for injectable and oral formulations used for the treatment of cancer and other indications like Multiple sclerosis, Hypertension, CNS disorders, Anti-Diabetics, myasthenia gravis, Ogilvie syndrome, Ulcerative colitis urinary retention, liver diseases, HIV, smoking cessation, Alopecia, and Eye disorders etc.

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However the Learned Jurisdictional Officer (JO) has not made any remark.

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5'3' (1) The learned Jo has disagreed with the answer given by the AAR to question No. 1 stating that^para-4(c) of the Schedule II of GGST Act, 20L7.

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(i) talks about another person and while analyzing it he travels beyond all the boundaries and comes to conclusion and creates a new word "distinct but same person". This observation is totally illogical and baseless in as much as for the purposes of payment of taxes and for taking of credit it is considered as different entities but for the purposes of transfer it is considered as same entity and not as to another person.

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(2) The learned JO is notable to come to conclusion either to say yes or no about supply of goods or services. Then are they saying the entire transaction is not a supply at all?

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(3) Further the Department has put forth a very illogical and without any legality reason for treating the activity as supply of goods. In their grounds, it is mentioned that the eligibility of ITC as declared by the assesse could not be established since the assesse did not submit the invoices of outward supplies and hence the activity cannot be categorized as supply of service and the same may be treated as supply of Goods. On these grounds alone the appeal merits to be set aside and the order of the AAR is to be upheld.

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For easy understanding, the section has been re produced herewith:

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Section 2(84) "Person" Section 2(84) of CGST Act, unless the context

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otherwise requires, - "person" includes -

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a) an individual;

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b) a Hindu Undivided family;

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c) a company;

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d) a firm;

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e) a Limited Liability^partnership;

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f) an association of persons or a body of individuals, whether incorporated or not, in India or outside India;

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g)anYcorporationestablishedbyorunderanyCentralAct,StateActor provinciar Act or a Government^{companyas defined in crause &5) of section2 0f} the comPanies^{Act, 2013;}

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h) anybody^{corporate incorporatedby or under the laws of a countryoutside} India;

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i)aco-operativesocietyregisteredunderanylawrelatingtoco-operative societies;

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j) a local authoritY;

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k) Central Government^{or a State Government;}

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l) society as^{defined under the societies Registration Act, 1860;}

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m) Trust; and

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n) every artificial^{juridicalperson,not falting within any of the above;} As the AAR order^{itSelf made it very clear that the " ""' thus, it disqualifies the} going concern, to be^{groupedunder .supply of goods, aS per the above} mentionedclause4(c).

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so the objections^{of the learned loare not at all clear and hencenot} maintainable.

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5.4. The learned lO^{points about the letters sent by the departmentto} M/s. Shilpa Medicare^{Limited. The copies of the said letters are submitted} herewith along with the^{replies given and the attachments/ documents} submitted. The^{allegation of no reply to their above mentionedletters dated} 24.07.2019 and 30.07.2019^{is totallynot correct and not acceptable.}

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5.5 The remark of the^{learned JO stating that the applicanthad not submittedany} documentary evidence to^{establish that the transaction is a going concern and} also points out that the^{same has been enunciated in the AAR order. The Order} of the AAR is^quite elaborate^{and has coveredthe various legal provisionsfor the} applicability of the^{provisions of GST while holding that the transaction merits to} be classified as Supply of^{services.The Order states that -Quote -"In the} instant case the activity of the^{'transfer'is made neitherfor a consideration,} neither in the course of the business^{nor for the furtheranceof the business.A} going concern is a onetime affair made^where the^{businessis sold including} assets in entirety or an independent^{part thereof.... Thoughthis transactiondoes} not amount to a 'supply' as^{per term, but qualified to be one under the scope of} supply as it is backed by the^{term 'includes' in Section 7(L) if the CGST Act,} 20L7. Thus, in the broadened interpretation^{of the term'includes', this activityis} brought under the scope of supply" -^Unquote'

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5.6 Regarding documentary evidence^{to prove it a going concern - we have clearly} submitted the GST registration^{and the monthly returns filed also statedthe} closing balance of ITC available as^{well. And we are ready to provide/ submit if} any additional documents are asked^for.

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Also we would like to mention that^{in the letters sent by the learned JO, it is} nowhere asked to submit any documentary^{evidence to establishthat the} transaction is^going concern.

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5'7 The learned Jo's observations for non-submission of documents (even though we have submitted the documents as requested by the department) is not true and correct in as much as the learned Jo to request the advance ruling authority to reject the eligibility of ITC and Nor to treat the activity as supply of service but to treat it as supply of Goods. It clearly shows that the learned Jo is in a total confusion.

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whether transfer of business is goods or a service?

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5'8 In terms of sec. 2(52) of GGST Act, 2017, "goods means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before suppty or under a contract of suppry,,.

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Therefore, to be called as goods, it has to be movable property. As business cannot be said to be movable, transfer of business cannot be said to be a transfer of goods. Now, we shall examine whether the said transaction can be called as service.

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In terms of sec. 2 (lo2), services mean anything other than goods. The term service is wider in its scope' As it covers anything other than goods, transfer of business which cannot be considered transfer of goods will fit into the definition of "service".

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Further, in case of the judgement given by Andhra pradesh High Court in case of Paradise Food Court v. State of Telanga na 2oL7 VIL 23g Ap in the context of VAT Law, it was held that the^,,

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therefore, not goods. Hence, based on the above we can conclude that transfer of business is a service. In the case of itemized sale, if the business is not transferred as a going concern then the same shall be treated as sale of goods in accordance with entry no.4(c) of schedule II of GGST Act, 20L7. (Detailed discussion follows in subsequent paras).

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5'9 Whether the activity of transfer of business satisfies the definition of supply?

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As per Sec. 7 of CGST Act, 2OL7, "supply includes all forms of suppty of goods or services or both such as sale, transfer,,,,.,in the course or furtherance of business, As the definition of supply covers transfer, the activity of transfer of business can be said to be covered under the definition of supply.,,

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However, a question may arise whether the activity is in the course of furtherance of business. As per sec. 2(t7)(d) of the CGST Act, 2oL7,,,business includes -supply or acquisition of goods including capitat goods and services in connection with commencement or closure of busine.ss. " Hence, transfer of assets during transfer of business is included in the definition of business and the activity of transfer of business is in the nature of supply which is in the course or furtherance of business.

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Further, as per Entry No. 4(c) of schedule II of the CGST Act, 2017 , where any person ceases to be a taxable person, then any goods forming part of fhe assefs of any business carried on by him, shall be deemed to be supplied by him in the

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course^{or furtherance ofbusiness unress the busin ess is transferred as a going} concern^{to another person,Hence,whereverbusinessis transferred as a going} concern,itisnottobetreatedassupplyasperthisclause.However,onemust notethatthereferencetoschedulellcannotbemadetoconcludewhethtransaction/activity^{is a suppryor not. It is merely crarificatory in natur} e ra^to conclude^{if the transactions are to be crassified as suppryof goods or supply of} service.simirar^{view is taken in the advance ruling given by Haryana Authorityof} Advance^{Ruling in case of M/s. B.M. Industries,33, Industrial Estate,Phase II,} Yamunanagar,^{Haryana- HAR/HAAR/R/2018 -tg I 02'}

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5.10^{Is the activityof transfer of business' taxable?}

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AsperEntryNo'2ofNotificationNo.L2l2o17-CentralTax(Rate)dated28th lune^{2017, services by way of transfer of a going concern as a whole or an} independent^{part thereof is exemptedfrom GST'} Hence,^{in order to avail the above exemption' the following conditionsshall be} satisfied -

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.Thetransferofbusinessshallbetransferofagoingconcern.

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. The business^{which is being transferred shall be transferredas a whole} or indePendent Part'

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Now let us^{analyze what is meant by the word going concern. The termgoing} concern is^{not defined in the GST law' Referencecan be made to Accounting} Standard^{(AS1) issued by the Institute of chartered Accountants of India} accordingtowhich..theenterpriseisnormaltyviewedasagoingconcerntthatis, ascontinuinginoperationfortheforeseeablefuture.Itisassumedthatthe enterprise^{has neither the intention nor the necessityof tiquidation or of} curtaiting materially^{the scale of the operations"' Based on this we can conclude} thatifanyenterpriseishavingtheintentiontocontinuethebusinessitcouldbe said to be^{a going concern. It is not necessary that all the assetsand liabilities} shallbetransferred,itissufficientifonlythoseassetswhichareessentialto continue the^{business are transferred,but that is being transferred should be} capableofbeingconsideredasawholeoranindependentpart.

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Further,inAARNo.l-0/20LggivenbytheAdvanceRulingAuthorityofthestate of Uttarakhand^{in case of M/s,Rajeev Bansal& SudarshanMittalit was held that} ,,transfer of business as a going concern is the sale of^{businessincluding assets'} In terms of^{Financialtransaction "going concern"has the meaning that at the} point in time to which^{the descriptionapplies, the business is live or operating} and has all^{parts and featuresnecessary to keep it in operation' Thus' transfer of} a going concern^{in asimple way can be describedas transfer of a running} business which^{is capable of being carried on by the purchaser as an} i nd ePe nd ent^{business. "}

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The second part of the exemption entry says that the transfer of business shall be as a whole or as an independent part thereof. It means that the business which is being transferred shall be capable of running a business activity on its own and the business which is being transferred shall be an independent unit.

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Thus, if the above conditions are satisfied, that is the business which is being transferred is a going concern and is transferred as an independent part thereof, then GST exemption can be claimed for the same.

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In view of the above, we respectfully pray that the appeal may be rejected and required directions may be passed so as to allow us to file the ITC-02 or other procedure to be followed to avail the ITC by the Bangalore Unit and along any other relief and oblige.

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6) Discussion and Finding:

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We have gone through the entire records of the appeal, facts of the case, and also considered the written and oral submissions made at length by the appellant and the party in dispute , Mls.Shilpa Medicare Limited as well, in light of the ruling pronounced by the AAR. on perusal of the information at hand, it is observed that the main issue of contention is whether the transfer of business of M/s. Shilpa Medicare Limited unit, Vizianagaram, Andhra Pradesh-S37L62 vide GST No.37AADCS8788F1ZR, to M/s. Shilpa Medicare Limited, Bengaluru, Karnataka - 562117, vide GST No.29AADCSBTBgFtzo, is a supply of goods or services or both. The AAR has taken the stance that the activity is a going concern and classified it to be a supply of service, whereas the appellant contested it as supply of goods.

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After careful examination of the competing arguments of the Lower Authority and the Revenue we come to a conclusion that there is consensus on the issue that it is a 'supply' primarily, and hence we take upon the question for further scrutiny, whether it is a suppry of goods or services or both. Part 4 (c) of Schedule II of the CGST Act, 2017 refers to the'transfer of business assets'which reads as under:

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"4. Transfer of business assefs

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(c) where any person ceases to be a taxable person, any goods forming part of fhe assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless-

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(i) the business is transferred as a going concern to another person; or,,

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Now we examine, in the instant case, whether transaction is qualified to be business being transferred as a going concern to 'another person, or not. In terms of section 2s (4) and section 25 (5) of CGST Act, zoL7.

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..Secflon25(4)Apersonwhohasobtainedorisrequiredtoobtainmorethan one registration,^{whetherin one stateor LJnion territory or more than one state} or^{(Jnion territoryshar, in respect of each such registration,be treatedas distinct} persons for^{the purposes of this Act"'}

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,,Section25(5)Whereapersonwhohasobtainedorisrequiredtoobtain registration^{in asfate or lJnion territory in respect of an establishment' has an} estabrishment^{in anotherstate or rJnionterritory, then such establishmentssha,} be treated^{as establishmentsof distinctpersonsfor the purposes of this Act"'} TheconceptofdistinctpersonhasbeennewlyintroducedunderGsTlaw.In brief, the^{establishmentsof a person with separate registrationswhether} within the^{samestate/UT or in different States/UTsare consideredas'distinct} person.'A^{supplier is requiredto obtain registration in every State/UT from} wherehemakestaxablesupplyprovidedhisaggregateturnoverexceedsa specified^{thresholdlimit'}

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The case^{at hand doesn,t qualify to be a.going Concern to anotherperson,,aS} M/s.ShilpaMedicareLimited,Vizianagaram,A'PandM/s'ShilpaMedicare Limited,^{Bangaloreunit are holdersof the same PAN and they are distinct} PerSonS.Hence,the^{provisionsof Para 4(c) of Schedule II of CGST Act,2oL7} do not apply^{in this case. Hence, it is treated as deemedsupply of goods'The} subsequent^{questionsof applicabilityof sl'No'2 of the Notification No'L2/2O17} -CentralTax(Rate)dated28'6,2olTandthetransferofunutilisedlTCdon,t arise as the^{transactionis classifiedas 'supply of goods' between distinct} persons.

¶126

CanlTC.o2befiledfortransferoflTCfromtheVizianagaramUnitto the Karnataka^Unit.

¶127

As discussed^{above,there is no supplyof servicebut a supplyof goods} (assets of the Vizianagaram^{Unit to the Unit in Karnataka State)'Therefore'} the question^{of transfer of ITC would not arise'}

¶128

M/s. Shilpa Medicare^{Limited, Vizianagaram seeks to transfer unutilized} ITC from the^{VizianagaramUnit to their KarnatakaUnit underthe provision} of Section 1B(3)^{of the CGST Act, 20L7 read with Rule 4L of the GGST Rules'} zotT and using^{FormITC-02. The said section 18(3) readsas follows:}

¶129

person on account of sale,^{merger, demerger, amalgamation,lease} or transfer of the^{businesswith the specificprovisions for transfer} of liabitities, the said^{registered personshatl be allowedto transfer} the input tax credit^{which remains unutilisedin his electronic credit} ledger to such sold,^{merged,demerged,amalgamated, leased ar} i .trdhsferrdd'b'usinebs'ii^{iuch manner as maY be prescribed'"}

¶130

The wording of Section^{18(3) makes it clear that the law permits the} transfer of unutilized^{ITC in the electronic credit ledger only when there is:}

¶131

¶132

(i) change in the constitution of such registered person and

¶133

(ii) such change is on account of sale, merge, demerger, amalgamation, lease or transfer of the business

¶134

(iii) andin the manner prescribed.

¶135

In the instant case, there is no evidence of^"change in the constitution of the registered person". A change in the constitution^would envisage^a change from say a proprietorship entity to a Partnership or a Company, or from a Partnership to a Company; or change in the constitution of the Shareholders, etc. There is no such thing happening in this case.^M/s, Shilpa Medicare Limited, Vizianagaram is one and the same entity^{as M/s.} Shilpa Medicare Limited, Bangalore, Karnataka. There is no change in the constitution of the entity as required under Section 18(3) of the CGST Act and therefore the provisions for transfer of ITC under Section 18(3) would not be permissible in this case.

¶136

Further, the GST law comprising of the Central GST Act, the Integrated GST Act and State / UT GST Acts, does not envisage the transfer of ITC in the form of CGST and SGST / UTGST accumulated in one State to another State. The scope of the AP GST Act cannot extend beyond the territory of the State of Andhra Pradesh. Similarly, the KSGST Act cannot extend beyond the borders of the State of Karnataka. Credit (ITC) accumulated under a particular State GST Act cannot be utilized in another State as there is no such provision under the extant law. Therefore, due to the exclusivity of ITC earned in a State, M/s. Shilpa Medicare Limited, Vizianagaram are not entitled to transfer the ITC earned in the State of Andhra Pradesh to themselves in the State of Karnataka. Hence, the facility of transfer of Credit using Form ITC-02 is not available in this case.

¶137

ORDER,

¶138

The ruling of the AAR is set aside and the transaction under question is 'supply of goods'and taxable accordingly as per the prevailing provisions of the CGST/APGST Act, 20L7. Further, M/s. Shilpa Medicare Limited, Vizianagaram are not entitled to file Form ITC-02 for transfer of ITC to their Bangalore Unit in the State of Karnataka.

¶139

Sd/- Peeyush Kumar Sd/- Naresh Penumaka Chief Commissioner (State Tax) Chief Commissioner (Central Tax) Member Member //t.c.f^.b.o/ / ffiDeputy Commissioner(ST) DEPUW COMMtSStoNER (Sr) W andv: Commissioner ol Slate Tar, n ^O/o.Chie{ [,$a ,Government^{ot A.p.. Vijayawada} \t // GsPI"rck{E'D /

¶140

¶141

¶142

L. The Deputy^{commissioner of centralTax, VizianagaramcentralGST Division'} Near Dandumaramma^{Temple, Cantonment Area'-Vizianagaram-535003'Andhra} Pradesh.

¶143

t4ls.shilpa^{Medicare Limited, survey No 207, ModavalasaVillage' Denkada} Mandal, vizianag;iam-S31162^{(A'P) (By RegisteredPost)'}

¶144

Copy to

¶145

1' The Assistant^{Commissionerof State Tax, Vizianagaram West Circle,}

¶146

Vizianagaram^{Division'(By Registered Post)}

¶147

The Superintendent,^{Central Tax VizianagaramSouth, CGST Vizianagaram} Division,(BY^{Registered Post)}

¶148

Copy submitted^to

¶149

The chief^{commissioner (state Tax), o/o chief Commissionerof state Tax'} EeduPugallu,^VijaYawada'

¶150

The chief^{Commissioner (central Tax), o/o chief commissionerof central tax} &Customs,^{Visa[6apatnamZone, CSi ghavan,Port area' Visakhapatnam-} 530035.(BY^{Registered Post)}

AAAR/AP/07(GST)/2020 of Deputy Commissioner of Central Tax, Division-Vizianagaram, Andhra Pradesh in case of M/s. Shilpa Medicare Limited

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AAAR/AP/07(GST)/2020 of Deputy Commissioner of Central Tax, Division-Vizianagaram, Andhra Pradesh in case of M/s. Shilpa Medicare Limited

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