Vat on sale of a business as a going concern
This query is : Resolved
20 April 2010
A sole proprietorship concern running a showroom wants to sell all capital assets and stocks to a partnership concern at the book values as on 31 mar 2010 as a going concern.. The sole proprietor is also an existing partner in the partnership business.Is Vat to be collected on such transfer. If so at what rate?
it may be noted that the building on which the show room existed belong to the sole proprietor. Now the building is proposed to be let out to the partnership on rent and business continue to operate in the same premises as a partnership concern in the name of the partnership firm.
it may be noted that the building on which the show room existed belong to the sole proprietor. Now the building is proposed to be let out to the partnership on rent and business continue to operate in the same premises as a partnership concern in the name of the partnership firm.
21 April 2010
IT IS ACASE OF CHANGE IN CONSTITUTION. APPLY FOR AMENDMENT IN RCs.
24 April 2010
You have not understood my query.
what i want to know is whether VAT to be collected in the situation mentioned by me
what i want to know is whether VAT to be collected in the situation mentioned by me
02 August 2025
In the case of **sale of a business as a going concern**, the VAT implications generally are as follows:
### Key Points:
1. **Sale of Business as a Going Concern:**
* Many states in India provide a VAT exemption on the sale of a business as a going concern, provided the **business continues to operate without interruption** under the new ownership.
* This means the transfer of **capital assets and stock as a whole** to the new entity may **not attract VAT**, if treated as a going concern sale.
2. **Transfer of Stock and Capital Assets:**
* If the transfer is made **as a going concern**, often the sale of stock-in-trade and capital goods is exempt from VAT.
* But if assets are sold separately or not as part of a going concern, VAT may be applicable at the standard rates.
3. **In Your Case:**
* The sole proprietor is transferring capital assets and stock to a partnership firm (where he is also a partner).
* The building is **not transferred** but will be let out on rent.
* Business will continue in the same premises under the partnership name.
* This situation typically qualifies as **transfer of business as a going concern**.
### VAT Treatment:
* If the state VAT law recognizes "sale as a going concern," **no VAT is usually payable on such transfer**.
* Rent received on the building will attract VAT as per rental income rules (if applicable).
* It’s important to notify the tax authorities and amend your VAT registration certificates to reflect the change in constitution and ownership.
### Recommendations:
* Check the specific state VAT law (as rules vary) about **going concern exemption**.
* Get a **written confirmation or advance ruling** from the commercial tax department.
* Ensure the **sale agreement clearly mentions the transaction as sale of business as a going concern**.
* Amend VAT registration certificates to reflect the change from sole proprietorship to partnership.
---
If you tell me the specific state, I can check if there are particular rules or notifications related to going concern sales under that state's VAT law. Would you like me to do that?
### Key Points:
1. **Sale of Business as a Going Concern:**
* Many states in India provide a VAT exemption on the sale of a business as a going concern, provided the **business continues to operate without interruption** under the new ownership.
* This means the transfer of **capital assets and stock as a whole** to the new entity may **not attract VAT**, if treated as a going concern sale.
2. **Transfer of Stock and Capital Assets:**
* If the transfer is made **as a going concern**, often the sale of stock-in-trade and capital goods is exempt from VAT.
* But if assets are sold separately or not as part of a going concern, VAT may be applicable at the standard rates.
3. **In Your Case:**
* The sole proprietor is transferring capital assets and stock to a partnership firm (where he is also a partner).
* The building is **not transferred** but will be let out on rent.
* Business will continue in the same premises under the partnership name.
* This situation typically qualifies as **transfer of business as a going concern**.
### VAT Treatment:
* If the state VAT law recognizes "sale as a going concern," **no VAT is usually payable on such transfer**.
* Rent received on the building will attract VAT as per rental income rules (if applicable).
* It’s important to notify the tax authorities and amend your VAT registration certificates to reflect the change in constitution and ownership.
### Recommendations:
* Check the specific state VAT law (as rules vary) about **going concern exemption**.
* Get a **written confirmation or advance ruling** from the commercial tax department.
* Ensure the **sale agreement clearly mentions the transaction as sale of business as a going concern**.
* Amend VAT registration certificates to reflect the change from sole proprietorship to partnership.
---
If you tell me the specific state, I can check if there are particular rules or notifications related to going concern sales under that state's VAT law. Would you like me to do that?
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