2024-VIL-174-AAR
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SGST Advance Ruling Authority

GST – Kerala AAR - Supply, Going Concern, Concession Agreement – Transfer of business or ‘operating lease’ - Applicant-Airports Authority of India (AAI) invited bids for the operations, management and development of Airport on a public-private partnership basis - the Concessionaire was awarded the project through a concession agreement - Whether the transfer of business to the Concessionaire would be treated as a supply under the GST law - whether it would qualify as a transfer of a going concern - GST implications of the concession fees, reimbursement of employee costs, and municipal taxes - Whether the transfer of business by AAI to the Concessionaire should be treated as a supply under the GST law – HELD - there is no transfer of any property or rights. All the rights and leases granted to the concessionaire are part and parcel of this development activity only. Everything related to the airport, the real estate, title, capital assets, installations, employees, goodwill and the brand remain with the applicant - The concessionaire is engaged to develop the airport for the applicant. The said activity of development is subject to approval and constant monitoring of the applicant. To this end, the operations and management has been handed over to the concessionaire. This does not fall under ‘transfer as going concern’ - the transaction in question cannot be classified as a transfer of business, but is only an operating lease - the concessionaire is supplying the service of developing the airport of the applicant and applicant is supplying the service of manpower, leasing etc., to the concessionaire and both constitutes supply under Section 7 of the CGST Act – Ordered accordingly - Whether the transaction can be treated as a transfer of a going concern - HELD - The transaction does not amount to a transfer of a going concern, as the essential and integral assets, employees, and operations of the airport have not been transferred to the Concessionaire. The Concessionaire is only entrusted with the task of developing and operating the airport as per the concession agreement, while the ownership and control of the airport assets remain with AAI - GST implications of the concession fees, reimbursement of employee costs, and municipal taxes – HELD - The concession fees paid by the Concessionaire to AAI are taxable as consideration for the lease of the airport facilities. The reimbursement of employee costs by the Concessionaire to AAI is also subject to GST. However, the reimbursement of municipal taxes, property taxes, and water charges by the Concessionaire to AAI does not attract GST, as it represents a mere reimbursement of expenses without any value addition - Whether GST is leviable on the transfer of Existing assets (“RAB”), Aeronautical Assets, non-aeronautical assets and Capital work in progress by M/s. Airport Authority of India to the M/s. Adani Thiruvananthapuram International Airport Limited – HELD - Since the assets mentioned have not been transferred to the concessionaire, the question per se is void-ab-initio. However, since the amounts are received as a consideration for leasing/supplying the assets to the concessionaire, GST is payable on the same.
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