GST not applicable on transfer of Jaipur Intl airport business to Adani group: AAR

New Delhi: The transfer of Jaipur international airport operations by Airports Authority of India (AAI) to the Adani group is exempted from Goods and Services Tax (GST), the Authority for Advance Ruling has said. 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. GST is a tax on the supply of goods and services in India. In this context, the AAI is seeking clarification on whether the transfer of assets in the context of a business transfer would be subject to GST.

Transfer of business as 'going concern' is considered as service under GST law

Transfer of business as a 'going concern', as a whole, or independent part thereof, is considered as a service under GST law and such supplies are exempt from goods and services tax. In its ruling dated March 20, the AAR said that the business arrangement entered vide concession agreement dated January 16, 2021, between the applicant (AAI) and Adani Jaipur International Airport is a transfer of 'going concern'.

Adani has taken over operations of Jaipur Intl Airport from AAI in Oct 2021

The Adani Group had in October, 2021, 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.

Adani Jaipur Intl Airport is supply that falls under the ambit of manpower service

The Rajasthan bench of the AAR also noted that in 2021 and 2022, the Gujarat and Uttar Pradesh benches of AAR too had ruled 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 18 percent under GST.

AMRG & Associates Senior Partner Rajat Mohan said that the AAR has ruled that considerations received from the transfer of running a business of whole airport operations by the Airport Authority of India are tax-neutral supply. "This ruling will have a strong influence on any other similar transfers by AAI in other locations of India," Mohan said.

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