2026-VIL-175-AAR
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SGST Advance Ruling Authority

GST - Transfer of business to a Private Limited Company without consideration, Scope of supply - Applicant, a partnership concern proposed to transfer its entire business as a going concern, with all assets, liabilities and employees, to a private limited company promoted by the same persons, without consideration, and thereafter to cease business and surrender its GST registration - Whether the transaction of transfer of business by way of merger of two registrations/distinct persons would constitute supply under the GST law - HELD - The concept of scope of supply under Section 7 of the CGST Act is an inclusive provision which goes beyond the expression 'all forms of supply of goods or services or both made for a consideration by a person in the course or furtherance of business'. Transfer of business is done neither in the usual course of business nor for furtherance of business, yet by virtue of the inclusive nature of the scope of supply, it can be regarded as supply - As per the proposed MoU, all rights, title, ownership, interest in the business, assets and customers, including liabilities, are transferred and employees continue in service. Such a transfer of business, even if without consideration and not in the usual course of business, is a supply under the CGST Act, 2017 - The question is answered in the affirmative - Nature of supply in transfer of business - Applicant proposed to transfer its entire business along with assets and liabilities to a private limited company - Whether the transaction would amount to supply of goods or supply of services - HELD - Entry 4(c) of Schedule II provides that where a person ceases to be a taxable person, goods forming part of the assets of the business are deemed to be supplied unless the business is transferred as a going concern to another person, which shows that transfer of business as a going concern does not amount to supply of goods - 'Services' under Section 2(102) means anything other than goods, money and securities, and activities or transactions featuring in Schedule II must be either a supply of goods or a supply of services. If transfer of business as a going concern to another person is not a supply of goods, it must be a supply of services - The transaction amounts to supply of services - Exemption to transfer of going concern under Serial No. 2 of Notification No. 12/2017-Central Tax (Rate) - Applicant proposed to transfer its business to a private limited company and claimed exemption for services by way of transfer of a going concern, as a whole or an independent part thereof - Whether the transaction would be covered under serial no. 2 of Notification No. 12/2017-Central Tax (Rate) - HELD - The GST Act does not define ‘going concern’; the concept must be understood in common parlance and financial standards, where a going concern is assumed to continue its operations and not be forced to liquidate its assets in the near future - The Applicant furnished no documentary evidence to prove that its business is a going concern, and merely stated that it has a running business and files GST returns regularly - The Authority was not in a position to determine whether the business qualifies as a going concern. However, if it is a going concern by all standards, the transfer of the business is covered by Entry No. 2 - The answer is in the affirmative, subject to the condition that the business qualifies as a going concern by all standards - Leviability of GST on transfer of closing stock and assets where business does not qualify as going concern - Applicant proposed to transfer its entire business, including closing stock and fixed assets, to a private limited company without consideration - Whether GST is leviable on the transfer of existing stock, assets and fixed assets if the transaction is not covered under serial no. 2 of Notification No. 12/2017-Central Tax (Rate) - HELD - If the Applicant's business fails to qualify as a going concern, the transfer of stock of goods, closing stock and assets will be considered as supply of goods by virtue of Entry No. 4(c) of Schedule II of the CGST Act and will be taxed as per the rate applicable for the respective goods.
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