PGA Tax newsletter Vol 5 of 2020 – Whether transfer of ongoing business subject to GST and other GST litigation matters


The provisions regarding Classification of Supply are said to be most controversial and grey area of the entire GST Laws leading to GST litigation. Section 7 of CGST Act, deals with supply and provides a list of activities considered as supply for the purpose of GST. M/s Shilpa Medicare Limited, the applicant undertakes R&D work in API & formulation molecules & manufacture of formulation products in small quantity.

AAR Andhra Pradesh further held that even though this transaction of sale of business does not amount to a ‘supply’ as per definition, but qualified to be one under the scope of supply as it is backed by the term ‘includes’ in Section 7(1) of the CGST Act, 2017. Thus, in the broadened interpretation of the term ‘includes’, this activity is brought under the scope of supply.

Here, the question raised by the applicant was, whether ‘ongoing concern’ is to be treated as ‘supply of goods’ or ‘supply of services’? The AAR held that the definition of services qualifies ‘anything other than goods’ as service. In this context it is obvious that the ‘going concern’, which was excluded form list of ‘supply of goods’ would automatically fall under ‘supply of services’

Also the querist asked that, the transfer of a going concern, as a whole or an independent part thereof is Nil rated pursuant to a notification issued by the government.

Lastly, the applicant asked whether the applicant can file GST ITC-02 return and transfer unutilized ITC from Vizianagaram, Andhra Pradesh unit to Bengaluru, Karnataka Unit. The AAR AP held that sale or transfer, the transferor can transfer unutilised input tax credit to the transferee, which is lying in his electronic credit ledger, by filing Form GST ITC-02.

The ruling provided to stop the GST litigation by the AAR, AP is as below:

1.The transaction would amount to supply of services.

2. The transaction would cover SI.No.2 of the Notification No.12/2017 Central Tax (Rate) dated 28.6.2017 and thus will be exempt from GST.

3. The unutilized ITC from Vizianagaram, Andhra Pradesh unit to Bengaluru, Karnataka Unit can be transferred by filing GST ITC-02.


The exemptions on various activities is granted by the government for its promotion and one such aspect is education. The term ‘educational institution’ is defined under Notification No. 12/2017-Central Tax (Rate) dt.28.06.2017.

The first question raised by the applicant namely M/S Master Minds (coaching institution) is whether applicant is supplying the services to the students as an educational institution?

The second question raised by the applicant that whether the services of supply of service of education as per the curriculum prescribed by the statutory authorities to the students of the applicant for obtaining qualifications certificates of CA / CMA duly are exempted under Notification No.12/2017 Central Tax (Rate) dt.28.06.2017 Not?

To avoid any further GST litigation, AAR AP held that the coaching or training service provided in respect of the courses pertaining to CA (Inter & Final) and ICWA (Inter & Final) does not fall under exemption clause as-

  • they are not related to pre-school education and education up to higher secondary school or equivalent.
  • the same is not related to imparting of education as a part of an approved vocational education course.
  • The coaching or training provided by the applicant is for preparing the students for appearing CA, ICWA Exams.
  • The said coaching does not lead to grant of a certificate or diploma or degree or qualification which is recognized by any law.
  • It only aims at giving a better preparation to the students and improves their chances in the examination.
  • It is pertinent to mention that the coaching or training as imparted by the applicant is neither mandatory nor sine qua non to the students.
  • Students, who prepare on their own, can also appear for these examinations and qualify basing on their performance.
  • The coaching or training imparted by the applicant is only a facilitation/ improvisation of the preparation for the said exams.
  • The coaching or training service provided by the applicant to the aspirants of CA or ICWA is not the service provided by means of ‘education as a part of curriculum that has been prescribed for obtaining a qualification prescribed by law’.

Hence it cannot be said that the coaching given by the applicant to CA/ICWA students would lead to grant of certificate/qualification recognized by law. Therefore, the service rendered by the applicant is not a service by way of ‘education as a part of curriculum for obtaining a qualification recognized by any law for the time being in force’.

In other words, CA coaching institutions are prime examples of commercialization in the field of education which, is a very fast-growing industry. The AAR, AP held that the services of the provision of food & accommodation to the students purusing the courses are liable to GST. Further, it was clarified by CBIC vide Notification dated 01.01.2019 that supply of food, beverages by an educational institution to its students, faculty & staff, where such supply is made by the educational institution itself, is exempt. As applicant is not qualified as an educational institute, the above exemptions won’t be applicable.


Renting of accommodation both residential property and commercial property is a service and thus, within purview of GST. However, there are many GST litigation on this matter. The applicant namely Lakshmi Tulasi Quality Fuels received monthly rentals on lease of her residential building on which she availed exemption as residential dwelling for residential use are kept out of the purview of the GST. The building was constructed for the purpose of running a lodge house. It was clear that the lessee is engaged in commercial activity of renting of rooms in the dwelling and providing boarding and hospitality. It was also clear that apart from renting of the rooms, the inmates were also provided with food and hospitality services.

As verified from the records, the lessee is a registered Taxable Person. Though the applicant claims that she has rented out residential dwelling for use as residence, it appears that the premise is a non-residential property. Considering the number of rooms and amenities provided in it, boarding and hospitality services extended to the inmates.

AAR AP held that the lessor has rented out her dwelling for commercial activity, and supply of such services, in the facts and circumstances of the case, are classifiable as “Rental or leasing services involving own or leased non-residential property” under Service Code (Tariff) 997212. It is taxable in the hands of the lessor and is liable for IGST @18%.

For any clarifications please contact or drop your query at the link We provide GST litigation services across India through our network of firms.

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