Sale of independent part of a business shall be treated as Supply of services by way of transfer of a going concern
Capfront Technologies Pvt. Ltd. [AAR, Karnataka]
Facts: The applicant own a mobile application, developed and owned by them, called as “LoanFront”, 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 (WPL). In view of the above, the applicant has sought advance ruling in respect of the following question:-
- Whether the GST would be applicable on the aforesaid transfer of mobile application software?
Held: The statement of facts conveys that 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 (WPL), 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.
Further vide SI.No 2 of the Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017, the said activity amounting to 'Services by way of transfer of a going concern, as a whole or an independent part thereof attracts 'Nil' rate of tax without any conditions.
