2026-VIL-147-AAR
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SGST Advance Ruling Authority

GST – West Bengal AAR - Transfer of business from proprietorship to partnership as going concern, Scope of supply, Applicability of exemption for going concern transfers – Proprietor proposed transfer of entire proprietorship business as going concern to LLP firm in which proprietor is partner - Whether permanent transfer of proprietorship business to partnership firm by merger without consideration, involving transfer of all assets, liabilities and employees for continuation of business, constitutes supply under GST and, if so, whether it qualifies for exemption under Entry No. 2 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - HELD - Transfer of business by way of merger, even if made without consideration and not in the usual course of business, constitutes supply within the scope of Section 7 of CGST Act by virtue of the inclusive definition of supply which goes beyond the normal course or furtherance of business. The transaction does not constitute supply of goods because business itself cannot be regarded as movable property and therefore does not meet definition of goods. By operation of Schedule II, where transfer of business as going concern to another person is effected, such transfer cannot be supply of goods. Since anything other than goods, money and securities constitutes services under the Act, the transfer of business must be treated as supply of services - Transfer of business is covered under Entry No. 2 of Notification No. 12/2017-CT (Rate) providing exemption for services by way of transfer of going concern, subject to the essential condition that the business qualifies as going concern by all standards - Going concern is not defined in the GST Act but must be understood in common parlance and financial standards. If the business fails to qualify as going concern, the transfer of stock, closing stock of assets and fixed assets would be treated as supply of goods under Schedule II Entry 4(c) and taxed at rates applicable to respective goods - Transfer of proprietorship business to partnership firm as going concern constitutes supply of services and is covered under Entry No. 2 of Notification No. 12/2017 providing for nil rate of tax, subject to condition that business qualifies as going concern. If business does not qualify as going concern, transfer of goods and assets would be taxable as supply of goods under respective applicable rates – Ordered accordingly
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