The Authority for Advance Rulings (AAR) at Karnataka has recently ruled in the application of The transfer of independent part of business pertaining to “LoanFront” app, a mobile software, qualifies to be a transfer of going concern and is exempted from Goods and Services Tax (GST).
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 (VVPL).
The applicant, M/s. Capfrony Technologies Pvt. Ltd., filed an application seeking advance ruling as per the provisions of the CGST/ Karnataka GST Act 2017 on whether the GST would be applicable on the aforesaid transfer of mobile application software.
The applicant submitted that, the assets must be sold as a part of ‘business’ as a going concern,
the purchaser intends to use the assets to carry on the same kind of business as the seller, where only part of business is sold, it must be capable of separate operation and that they must not be a series of immediately consecutive transfers.
In view of the submission of the facts, it was observed 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(VVPL), who would not only enjoy a right over the assets but shall also take over the liabilities.”
It was thus observed that, the taking over of liabilities 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.”
It was hence observed that, the said activity amounts to “Service by way of transfer of going concern as an independent part” and thus in terms of Sl. No. 2 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended.” and ruled that the transfer is entitled to Goods and Services Tax (GST) exemption.
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