GST LIABILITY ON SLUMP SALE OF AN UNDERTAKING

Reply- SLUMP SALE MEANING: Slump sale is a sale of an undertaking as a going concern. As per section 2(42C) of Income-tax Act 1961, ‘slump sale’ means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales.

The main elements of a slump sale are:

1. Sale of undertaking

2. As a going concern

3. For a lump sum condensation; and

4. No separate value is assigned to individual assets and liabilities.

As per Entry No. 2 of Notification No. 12/2017–Central Tax (Rate) dated 28th June 2017, services by way of transfer of a Going concern as a whole or an independent part thereof is exempted from GST. If the Sale of business is as a Going concern it will not attract GST. 

As per point 4(c) of  Schedule II of CGST Act, 2017, where any person ceases to be a taxable person, any goods forming part of the 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—

(i) the business is transferred as a Going concern to another person; or
(ii) the business is carried on by a personal representative who is deemed to be a taxable person.

As per exception no. (i) mentioned above the GST is not applicable on slum sale