*******UP AAR: Transfer of Lucknow Airport to Adani, transfer of going concern, does not attract GST – The Hindu BusinessLine

Clipped from: https://www.thehindubusinessline.com/economy/up-aar-transfer-of-lucknow-airport-to-adani-transfer-of-going-concern-does-not-attract-gst/article65643711.ece

Gujarat AAR ruled on a similar line for Ahmedabad Airport too

Transfer of business from Lucknow Airport by Airport Authority of India (AAI) to Adani Enterprises will not attract Goods and Service Tax (GST), Uttar Pradesh’s Authority for Advance Ruling (UPAAR) has said.

This is the second ruling in the matter of airport transfer. Earlier, Gujarat AAR (GAAR) gave a similar ruling in the matter of the transfer of business of Ahmedabad airport to Adani Enterprises. Experts say though the AAR ruling is applicable only to the applicant and the jurisdictional tax officer, it can be relied upon in similar matters. This means such rulings can help entities going for a transfer of going concern.

AAI moved to AAT to seek an advance ruling on a set of queries, including whether the supply of transfer of business to Adani Lucknow International Airport Limited be treated as a “Transfer of Going Concern” and whether such supply is covered under the exemption notification. After going through all the facts and arguments, AAR replied in the affirmative to both the questions. AAR also said that concession fees paid by Adani Lucknow International Airport AAI will not be treated as consideration for the transfer of business. Hence, GST will not be applicable on monthly or annual concession fees charged by AAI.

In response to a query about whether GST is leviable on the invoice raised by AAI for reimbursement of the salary/staff cost of Adani Lucknow International Airport, AAR said it will attract GST at the rate of 18 per cent.

Ankur Gupta, Practice Leader (Indirect Tax) at SW India, says the UPAAR ruling captures and discusses points on the distinction between transfer and sale, goods and services, and what would constitute “transfer as going concerned.” The key parameters considered for the test of going concern are whether the transferred business would continue for the foreseeable future as was done prior to the transfer and whether the assets and liabilities would be sufficient to run the business independently.

The ruling also discusses the taxability of emoluments, which is very common in this type of business transfer. The AAR has ruled that emoluments paid to employees who are not getting transferred and continue to be on the payroll of the transferor would be a supply of manpower and hence a taxable activity under GST. “While AARs are not binding on other taxpayers, they do hold persuasive value. Therefore, reference can be drawn on the indicators covered in the ruling to structure slump sale transactions and optimise tax impact on such transactions,” Gupta said.

AAI has leased out eight of its airports, namely, Delhi, Mumbai, Lucknow, Ahmedabad, Mangaluru, Jaipur, Guwahati, and Thiruvananthapuram, through public-private partnerships (PPP) for operation, management, and development on a long-term lease basis. Out of these, Delhi and Mumbai airports were handed over in 2006. Three airports, viz. Ahmedabad, Lucknow, and Mangaluru, were handed over in October-November, 2020 and the remaining three airports, viz. Jaipur, Guwahati, and Thiruvananthapuram, were given in October, 2021.

The criteria for the selection of private partners for Delhi and Mumbai airports was revenue share, whereas the selection criteria for six airports, viz., Lucknow, Ahmedabad, Mangaluru, Jaipur, Guwahati, and Thiruvananthapuram, was Per Passenger Fee (PPF) payable to AAI.

Published on July 15, 2022

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