Transfer of an entire business as a going concern does not constitute taxable supply under GST; input tax credit can transfer under specified conditions.

Order :

R.Raghunandan Rao, J.

Heard Sri V. Raghuraman, the learned Senior Counsel appearing on behalf of Sri Anil Kumar Bezawada, learned counsel for the petitioner and Sri P.S.P. Suresh Kumar, the learned Standing Counsel appearing for the respondents.

2. The petitioner herein is a limited company which undertakes Research and Development in Pharmaceuticals including active pharmaceutical ingredients, formulation of molecules and manufacture of formulation products. The petitioner had one Research and Development Center situated in Karnataka State and another in Modavalasa Village, Denkada Mandal, Vizianagaram District of Andhra Pradesh. The unit in Vizianagaram was registered under the GST Act with Registration No.37AADCS8788F1ZR. Similarly, the Bangalore Unit of the petitioner was also registered, in the State of Karnataka, with GST No.29AADCS8788F1ZO. The petitioner had been allotted a Permanent Account Number, under the Income Tax Act, bearing PAN No.AADCS8788F. The petitioner decided to transfer its R&D Center in Vizianagaram to Bangalore. For this purpose, the Vizianagaram Unit as well as the Bangalore Unit entered into a Business Transfer Agreement, dated 26.06.2019. Under this agreement, the business assets and business liability of the Vizianagaram Unit, as a going concern, was transferred to the Bangalore Unit for Zero consideration. The R&D business undertaking, which was the subject matter of the transfer, was defined, under the business transfer agreement of 26.06.2019 in the following manner:

R&D Business Undertaking" means the undertaking of the R&D Business consisting of the following:

a) Movable Property of the R&D Business Undertaking As a part of Annex-1.

b) All Assets Book debts, advances, deposits, receivables as per books of record on the date of transfer.

c) All Liabilities including statutory on the date of transfer.

d) All Employees to this Agreement, on the same terms and conditions of service as they are employed by the Transferor, including as to length and continuity of service including long term & short Term benefit.

e) Books, Records and Ledgers: Customer contracts, know-how, brands and other Intangibles, as may be mutually agreed between the Parties and;

f) Technical or other information if any used primarily in connection with (a) to (e) above and as agreed between the Parties on or prior to the Closing Date.

3. After executing this agreement, the petitioner had approached the Authority for Advance Ruling for a ruling, on the following three questions:

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

2. Whether the transaction would be covered Sl.No.2 of the Notification No.12/2017- Central Tax (Rate) dated 28.6.2017?

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

4. The authority for advance ruling by its decision, dated 24.02.2020, in AAR No.05/AP/GST/2020, had held that the transaction was a supply of services, which was covered under SL.No.2 of Notification No.12/2017-Central Tax (Rate), exempting the said transaction from tax. The authority also held in the affirmative, that the unutilized input tax credit ava