One of our clients are selling their proprietorship business (owned by father) to the pvt. ltd. company (in which the prop. is also a director) will this sale attract GST.
6 Replies
R. B. Yadav (CMA, LLB)
(Tax Consultant)
(590 Points)
Replied 03 July 2018
Yes, it is treated as a supply under GST, GST will be applicable on this transaction.
renu dutt
(c a)
(231 Points)
Replied 03 July 2018
Somebody reffered Entry 2 of Notification No. 12/2017 -central tax (Rate) dated 28th June 2017, and clarified that this merger will be Exempt from GST, I am confused ,please reply.
Pankaj Rawat
(GST Practitioner)
(55052 Points)
Replied 03 July 2018
If it is being Transferred,.. No GST is applicable
As per schedule II clause 4(c)(1) says it will not Deemed to Be SUPPLY is such business being transferred as going concern to another person
As per schedule II clause 4(c)(1) says it will not Deemed to Be SUPPLY is such business being transferred as going concern to another person
Vinod Babu
(24191 Points)
Replied 03 July 2018
LEGAL TALK
Conversion of a sole proprietorship concern to a company [Legal Talk]
Team YSJul 6, 2012
Many entrepreneurs start their businesses as a sole proprietorship due to the low compliance requirements. As the business and the revenues grow, there is a need to separate the bank accounts and the tax filings of the sole proprietor and that of the business. To achieve this separation a possible solution is to convert the sole proprietorship into a private limited company. In this article, we discuss how this conversion can be done and you as a shareholder can avail of the provisions of law in this regard.
To convert a sole proprietorship concern into a private limited company, an agreement has to be executed between the sole proprietor and the private limited company (once it is incorporated) for the sale of the business. Further, such private limited company so incorporated must have “the takeover of a sole proprietorship concern” as one of the objects in its Memorandum of Association. Further, there are also certain other requirements and issues related to this process as set forth below:
A. Requirements under the Companies Act:
Section 75 of the Companies Act, 1956, as amended (Companies Act) states that whenever a company makes any allotment of its shares as fully or partly paid up otherwise than in cash, to any person, then a written contract of sale, or a contract for services or other consideration in respect of which that allotment was made must be produced for inspection to the relevant Registrar of Companies (RoC). Further, such company is also required to within thirty (30) days, thereafter, file with the RoC within thirty (30) days, copies of all such contracts and a return stating the number and nominal amount of shares so allotted and the extent to which they are paid up along with the mode of consideration.
B. Exemption under the Income Tax Act:
Conversion of a sole proprietorship into a private limited company entails a “transfer” within the meaning of the Income Tax Act, 1961, as amended (Income Tax Act). That is, the assets of the sole proprietorship concern are considered transferred to the newly formed company, which makes the sole proprietor liable to pay tax for any capital gains calculated on such transfer. However, there is a provision under section 47(xiv) of the Incoem Tax Act, which lays down certain conditions for exemption from any capital gains.
Conversion of a sole proprietorship concern to a company [Legal Talk]
Team YSJul 6, 2012
Many entrepreneurs start their businesses as a sole proprietorship due to the low compliance requirements. As the business and the revenues grow, there is a need to separate the bank accounts and the tax filings of the sole proprietor and that of the business. To achieve this separation a possible solution is to convert the sole proprietorship into a private limited company. In this article, we discuss how this conversion can be done and you as a shareholder can avail of the provisions of law in this regard.
To convert a sole proprietorship concern into a private limited company, an agreement has to be executed between the sole proprietor and the private limited company (once it is incorporated) for the sale of the business. Further, such private limited company so incorporated must have “the takeover of a sole proprietorship concern” as one of the objects in its Memorandum of Association. Further, there are also certain other requirements and issues related to this process as set forth below:
A. Requirements under the Companies Act:
Section 75 of the Companies Act, 1956, as amended (Companies Act) states that whenever a company makes any allotment of its shares as fully or partly paid up otherwise than in cash, to any person, then a written contract of sale, or a contract for services or other consideration in respect of which that allotment was made must be produced for inspection to the relevant Registrar of Companies (RoC). Further, such company is also required to within thirty (30) days, thereafter, file with the RoC within thirty (30) days, copies of all such contracts and a return stating the number and nominal amount of shares so allotted and the extent to which they are paid up along with the mode of consideration.
B. Exemption under the Income Tax Act:
Conversion of a sole proprietorship into a private limited company entails a “transfer” within the meaning of the Income Tax Act, 1961, as amended (Income Tax Act). That is, the assets of the sole proprietorship concern are considered transferred to the newly formed company, which makes the sole proprietor liable to pay tax for any capital gains calculated on such transfer. However, there is a provision under section 47(xiv) of the Incoem Tax Act, which lays down certain conditions for exemption from any capital gains.
renu dutt
(c a)
(231 Points)
Replied 03 July 2018
Thank you for elobrating on this issue, but Vinodji what are your views on compliance under GST.
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