GST – AAR Karnataka: The instant business transfer contemplates the transfer of the entire aforesaid business to a new person (VVPL), who would not only enjoy a right over the assets but shall also take over the liabilities – Hence, the said activity amounts to "Service by way of transfer of going concern as an independent part" and thus is exempted from GST [Order attached]
Order date: 12 December 2022
- The applicant, M.P. Ravi Prashad, own a mobile application, developed and owned by them, called as "Loan Front", which is a Fintech product and is used as a digital platform to facilitate lending of short term personal loans; they intend to transfer the said mobile application software to their wholly owned subsidiary M/s Vaibhav Vyapaar Private Limited (VVPL).
- The applicant submitted that they intend to sell & assign the rights, obligations, source codes, development specifications along with the end user manuals and instructions to their wholly owned subsidiary M/s. VVPL.
- The business activity of the applicant, after the said transfer, would be that of lead generator and continue to earn its revenue through outsourcing agreements, any technical support with regard to the software and similar others.
- The applicant submitted that they intend to sell an independent part of their business to VVPL along with assets & liabilities and contends that transfer of business as a whole or independent part thereof amounts to the supply of service.
- Whether the impugned transfer of part of the applicant's business related to "LoanFront" App qualifies to be a service by way of transfer of going concern and thereby exempted or not in terms of Notification 12/2017.
- The authorities considered the transfer of business pertains to "LoanFront" app sought to be sold is a fully functional part of the business and the transaction contemplates the transfer of the entire aforesaid business to a new person(VVPL), who would not only enjoy a right over the assets but shall also take over the liabilities.
- It thus postulates that there will be a continuity of business, as the said part of business is said to be functional and is decided to be transferred as a whole to a new owner, and thus amounts to transfer of a going concern, of the said independent part of the business.
- The transfer of independent part of business pertaining to "LoanFront" app, a mobile software, qualifies to be a transfer of going concern, and the said activity amounts to "Service by way of transfer of going concern as an independent part" and thus is exempted from GST in terms of Sl.no.2 of the Notification No.12/2017-Central Tax (Rate) dated 18-06-2017.