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GST on sale of business

 

According to section 11(1)(m) of GST Act 1985 , if the business is sold as a going concern, the sale will be zero rating for GST.

 

Moreover, Part 1 (2) Interpretation defines going concern as: going concern, in relation to a supplier and a recipient, means the situation where—

  1. there is a supply of a taxable activity, or of a part of a taxable activity where that part is capable of separate operation; and
  2. all of the goods and services that are necessary for the continued operation of that taxable activity or that part of a taxable activity are supplied to the recipient; and
  3. the supplier carries on, or is to carry on, that taxable activity or that part of a taxable activity up to the time of its transfer to the recipient.

 

It means that when you sell your business to another purchase and the purchase takes over and continues business operation, it is a going concern situation.

Therefore, the sale will be zero rating for GST.  It is important that the sale must be recorded as zero rating for GST. The same principle also applies to any assets included in the sale. 

 

Disclaimer: The following answer necessarily sets out general principles only. The facts of particular cases always need to be considered carefully, and it may be necessary to obtain advice from a tax expert.

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