In a significant ruling, the Andhra Pradesh High Court addressed the tax implications of transferring a business unit as a going concern. The case involved M/s Shilpa Medicare Limited, which transferred its R&D unit from Vizianagaram to Bengaluru under a Business Transfer Agreement. The transaction included all assets, liabilities, and employees, and was executed for nil consideration. Initially, the Authority for Advance Ruling classified this as an exempt supply of services under Entry 2 of Notification No. 12/2017-CT (Rate), allowing the transfer of unutilised input tax credit (ITC). However, the Appellate Authority for Advance Ruling reversed this decision, treating it as a taxable supply of goods and disallowing ITC transfer.
The High Court was tasked with determining whether such a transfer constitutes a taxable supply under GST law and if unutilised ITC can be transferred between distinct GST registrations of the same entity.
Read More: Delhi High Court: Responsibility to monitor communications on GST portal rests with taxpayer - Contention of Chartered Accountant's negiligence cannot justify writ interference - Ex-parte demand sustained [Order attached]
The Court ruled that transferring an entire business as a going concern does not amount to a supply made “in the course or furtherance of business” under Section 7 of the CGST/APGST Acts, and hence is not taxable. It emphasized that a whole business transfer is distinct from selling individual goods and cannot be artificially split for GST purposes. Furthermore, even if considered a supply of services, the transaction is exempt under the mentioned notification.
The Court also clarified that distinct GST registrations under the same PAN are treated as distinct persons, thereby permitting the transfer of unutilised ITC between the Vizianagaram and Bengaluru units under Section 18(3) of the CGST Act. This decision overturned the Appellate Authority's ruling, allowing the ITC transfer.
Parties: M/s Shilpa Medicare Limited v. Union of India & Ors.
Order Date: 31 January 2026
Facts
- The petitioner operated two registered GST units—an R&D centre at Vizianagaram (Andhra Pradesh) and another at Bengaluru (Karnataka), both under the same PAN.
- Pursuant to a Business Transfer Agreement dated 26.06.2019, the Vizianagaram R&D unit was transferred to the Bengaluru unit as a going concern for nil consideration, including assets, liabilities, and employees.
- The Authority for Advance Ruling held the transaction to be an exempt supply of services under Entry 2 of Notification No. 12/2017-CT (Rate) and permitted transfer of unutilised ITC.
- The Appellate Authority for Advance Ruling reversed the ruling, treating the transaction as a taxable supply of goods and disallowing transfer of ITC, leading to the present writ petition.
Issue
- Whether transfer of an entire business unit as a going concern constitutes a taxable “supply” under the GST law and whether unutilised input tax credit can be transferred between distinct GST registrations of the same legal entity?
Order
- The High Court held that transfer of an entire business undertaking as a going concern does not amount to a supply made “in the course or furtherance of business” and is therefore not taxable under Section 7 of the CGST/APGST Acts.
- The Court observed that sale or transfer of a business as a whole is distinct from sale of individual goods and cannot be artificially split for levy of GST.
- It was further held that even assuming the transaction to be a supply of services, it is expressly exempt under Entry 2 of Notification No. 12/2017-CT (Rate).
- The Court rejected the AAAR’s reasoning and clarified that distinct GST registrations under the same PAN are treated as distinct persons under GST law.
- Accordingly, transfer of unutilised input tax credit from the Vizianagaram unit to the Bengaluru unit was held to be permissible under Section 18(3) of the CGST Act.
