THIS IS THE LATEST POSITION ON VAT ON SLUMP SALE :
1. Slump sale. In relation to slump sales, before the enactment of state-specific VAT statutes, judicial interpretation was that sales tax cannot be imposed when a business is sold. There was a standard requirement across all state sales tax legislation that a dealer must be a person carrying on business and sales are taxed when they are in the course of business. A person is generally not carrying on the business of selling businesses, and the sale of a going concern with all movables cannot be considered as a sale in the course of business. Therefore, a slump sale per se should not attract sales tax.However, with the enactment of VAT legislation, the position has changed under the various states, which deem any transaction in connection with commencement or closure of business a transaction comprised in business. Therefore in a slump sale where the transferor entity would close down its business by completing the sale, this transaction may attract the VAT in some states. However, in states where such a definition of business is not specifically provided in the state specific VAT legislation, VAT should not apply to a slump sale.
ANOTHER VIEW :
A view has been taken that there is no Sales Tax payable on the transfer of a business as a going concern, including the transfer of a whole unit or division of any business under the value-added tax laws or the local sales tax laws. This is based on the rationale that the sale of an entire business cannot be equated with the sale of movable goods, the latter being subject to sales tax, i.e. Sale of “business” is not considered to be “goods” under sales tax laws.
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