What is a slump sale agreement?

A Slump sale can be defined as a sale where no particular value is given to the assets and liabilities of a business on a going-concern basis. Primarily a Slump sale can be made through a Business Transfer Agreement or through a Scheme of Arrangement under section 230-232 of Companies Act, 2013.

What is slump sale as per Section 2 42C?

Section 2(42C) of Income Tax Act, 1961 defines “slump sale” to mean the transfer of one or more undertakings as a result of sale for lump sum consideration without value being assigned to individual assets and liabilities in such sales.

What is the meaning of slump sale?

Slump Sale under Income Tax A slump sale for income tax purposes would be one where an undertaking is sold without considering the individual values of the assets or liabilities contained within the undertaking.

What is the difference between slump sale and demerger?

From a taxation perspective, a court approved demerger scheme is beneficial compared to a slump sale. Slump sale agreements on the other hand are stamped as agreements and every asset to be conveyed under the slump sale is treated individually with stamp payable on the instrument for its conveyance.

What is slump sale with example?

Slump sale means the transfer of one or more undertaking, by any means, for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales.

Is valuation required for slump sale?

The Valuation Rules come on the heels of an amendment made earlier this year via the Finance Act, 2021 requiring capital gains from slump sales to be computed with reference to fair market value (“FMV”) of the undertaking being transferred.

How do you calculate tax on slump sale?

Taxability arises in the year of transfer of the undertaking. Capital gains arising on slump sale are calculated as the difference between sale consideration and the net worth of the undertaking. Net worth is deemed to be the cost of acquisition and cost of improvement for section 48 and section 49 of the Act.

Does slump sale require court approval?

No kind of court approval is required in the case of an asset sale. The transfer of asset or liabilities is dependent on the acquirer.

Is GST applicable on slump sale?

Under GST, supply includes the supply of all types of goods and services such as sale, transfer, lease, rental, license, barter or disposal made for a consideration by one person to another in course of furtherance of business. So, from the above definition, we can say that slump sale is considered as supply under GST.

What happens in a slump sale?

Is valuation report required for slump sale?

CBDT notified Rule 11UAE computation of FMV of capital assets for the purpose of section 50B of the income tax act, 1961. FMV of the net assets shall be higher of the two and valuation date shall be the slump sale date.

What is slump sale under Income Tax Act?

Is there stamp duty on sale of immovable property?

Article 5 (e) of the KS Act prescribes the stamp duty chargeable on an agreement relating to sale of immovable property with part-performance of the contract being made.

What is the definition of a slump sale?

Slump sale is simply defined as a sale where no particular value is given to the assets and liabilities of a business. It is known as a going-concern transfer or an as-is transfer.

Do you pay GST on a slump sale?

Further, unlike in a demerger, the consideration for the slump sale is paid to the transferor company and not to its shareholders directly. Whether GST applies to Slump Sale ? Slump sale will also be subject to stamp duty. It differs from state to state as per their respective laws.

Can a slump sale be done through a demerger?

In the case of non-corporate entities, where the transfer is not possible through a merger or a demerger, slump sale can be one of the options that can be taken for the transfer of business undertaking. Understanding the relevance of section 50B of the Income Tax Act, 1961 (“ITA, 1961”)

What are the tax provisions of slump sale?

Article explains Provisions of Slump Sale under the Companies Act, 2013 and Income Tax Act, 1961. It explains Slump Sale through Business Transfer Agreement (BTA), Slump Sale through Scheme of Arrangement, Stamp Duty Chargeable On Business Transfer Agreement.

Article 5 (e) of the KS Act prescribes the stamp duty chargeable on an agreement relating to sale of immovable property with part-performance of the contract being made.

What is the duration of a slump sale?

Slump Sale through BTA: A slump sale is mainly affected by the way of Business Transfer Agreement (“BTA”). BTA’s are typically subject to negotiations. Duration for BTA: the BTA is effectively executed within 1-2 months of conceiving the Slump Sale.

As per section 2(42C) of Income -tax Act 1961, ‘slump sale’ means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales.

How are capital gains calculated on slump sale?

Section 50B: (1) Any profits or gains arising from the slump sale effected in the previous year shall be chargeable to income-tax as capital gains arising from the transfer of long-term capital assets and shall be deemed to be the income of the previous year in which the transfer took place.

What is Rule 11UA?

Rule 11UA(1) prescribes the manner to find out the fair market value of the following property. a) Valuation of Jewellery. b) Valuation of archaeological collections, drawings, paintings, sculptures or any work of art. c) Valuation of shares and securities. a) Fair market value of quoted shares and securities.

Is GST applicable on asset transfer?

Permanent transfer or sale of business assets on which input tax credit has been availed will also be treated as supply even if there is no consideration received. GST is applicable to the sale of business assets only. It does not apply to the sale of personal land or building and other personal assets.

What is a sale of going concern?

You are selling a ‘going concern’ if: the sale includes everything that’s necessary for the continued operation of the business. the business is carried on by you until the day of sale.

Can the market value be negative?

No matter how complex the stock market may be, stocks simply represent shares of ownership in a company. However, a stock can never fall to a negative value. A value of zero indicates that no investor is willing to buy the stock, no matter how low the price – essentially, that the corporation has no value.

How do you calculate unlisted stock price?

Book Value Method – Unlisted Stocks Valuation Technique As per this method, you have to club the book value of all the tangible assets. Then the book value of all tangible liabilities is taken together and then you need to subtract the same from the assets’ value as mentioned above.

Who will notify the rate of tax to be levied under Cgst act?

Central Government
Central Government as per the recommendations of the GST Council will notify the rate of tax to be levied under CGST.

Can residential property be sold as a going concern?

The Seller must be charging VAT on the rental for it to qualify as a going concern. Residential property (other than a Guest House), is exempt from VAT . Even if both parties are VAT vendors, it could never qualify as a going concern.

What is going concern exemption?

What is the going concern exemption? A ‘going concern’ for the purposes of GST law refers to an enterprise’s ability to continue functioning after the date of supply. If the supply of an enterprise is deemed to be the supply of a ‘going concern’, then the supply of that enterprise is GST exempt.

Do I owe money if my stock goes down?

Do I owe money if a stock goes down? The value of your investment will decrease, but you will not owe money. If you buy stock using borrowed money, you will owe money no matter which way the stock price goes because you have to repay the loan.

What happens if my stock goes to zero?

A drop in price to zero means the investor loses his or her entire investment – a return of -100%. Because the stock is worthless, the investor holding a short position does not have to buy back the shares and return them to the lender (usually a broker), which means the short position gains a 100% return.

What is pre IPO stock?

Pre-IPO placements occur when IPO underwriters make stocks available at a discount to selected investors before an IPO. These typically happen immediately before the IPO. Stock options are sometimes provided to employees, who may resell their shares, subject to restrictions.