GST not applicable on transfer of Jaipur International airport business to Adani group: AAR-Rajastan

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The transfer of Jaipur international airport operations by Airports Authority of India (AAI) to the M/s. Adani Jaipur International Airport Limited *is exempted from Goods and Services Tax (GST)*, as per the ruling of the Authority for Advance Ruling. 

In its business transfer arrangement entered vide agreement dated January 16, 2021, between the applicant Airport Authority of India (AAI) and M/s. Adani Jaipur International Airport Limited (a Special Purpose Vehicle) the operations of Jaipur Airport has been transferred as a 'going concern' and consequently the Adani Group had in October, 2021, have taken over the operations, management, and development of the Jaipur International Airport from the AAI. The airport has been leased out to the group by the government of India for a period of 50 years.

The AAI had approached the Rajasthan bench of the Authority for Advance Ruling (AAR) seeking a ruling on  " Whether a transfer of the business to Adani Jaipur International Airport Ltd is treated as supply as 'going concern' and whether GST is leviable on transfer of assets ?"

A 'going concern' refers to a business or entity that is expected to continue operating and generating revenue in the future. Transferring a business as a going concern means that the buyer is acquiring all of the assets and liabilities of the business and that the business will continue to operate as usual, without any interruption in its operations.

It has been ruled that the transaction is a Supply in terms of Subject Supply of “Transfer of Going Concern Service for a foreseeable future” is under Section 7 CGST Act, 2017, and the same is also not covered in clause 4(c) of schedule II of CGST Act viz-a-viz RGST.

The Concession Fee is to be treated as part of the Consideration paid by M/s. Adani Jaipur International Airport Limited (a Special purpose Vehicle created for this purpose) to AAI in subject matter but is covered at Entry No. 2 of Notification 12/2017-CT(R) and attracts NIL rate of Tax while reversal of proportionate ITC is required in accordance with section 17 (2)/ (3) of CGST Act viz-a-viz RGST Act 2017.

The Rajasthan bench of the AAR also noted that the decisions taken by the Authority of Advance Ruling of Gujarat, Advance Ruling No. GUJ/GAAR/R/46/2021 dated 27.08.2021 and Authority of Advance Ruling of Uttar Pradesh UP also vide Advance Ruling No Up ADRG-03/2022 dated 13/05/2022 benches of AAR which too had ruled on similar lines that business arrangements between AAI and Special Purpose Vehicle (SPV) are covered under transfer of 'going concern'.

However, the invoice raised by AAI for reimbursement of salary /staff cost on Adani Jaipur International Airport Ltd is a supply that falls under the ambit of manpower service and is hence taxable at the rate of 18% (9 % CGST and 9% Raj-SGST).

Well….

This ruling will have a very strong persuasive impact for any other similar transfers by AAI in other locations of India.

SRIVATSAN.R.

GST-Chennai

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