Transfer of the Fintech app as an independent part of the business is transfer of going concern, no GST: AAR
The Authority for Advance Rulings (AAR) in Karnataka has recently ruled in the application for transfer of independent parts of the business relating to the “LoanFront” app, a mobile software, qualifies to be a going concern transfer and is exempt from Goods and Services Tax ( GST).
The applicant owns a mobile application, developed and owned by them, called “LoanFront”, which is a Fintech product and is used as a digital platform to facilitate the 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 under the provisions of CGST/Karnataka GST Act 2017 on whether GST would be applicable on the above transfer of mobile application software.
The applicant stated that the assets must be sold as part of “business” as a going concern,
the buyer intends to use the assets to carry on the same type of business as the seller, where only part of the business is sold, it must be able to be operated separately and that they must not be a series of immediately successive transfers.
In view of the presentation of facts, it was observed that “the transfer of the business relates to the ‘LoanFront’ app which is sought to be sold is a fully functional part of the business and the transaction contemplates the transfer of the entire said business to a new person (VVPL), who does not will only have rights over the assets, but who will also take over the liabilities.”
It was thus observed that, taking over debt postulates that there will be a continuity in the business, as the said part of the business is said to be functional and decided to be collectively transferred to the new owner, and thus constitutes the transfer of a continued operation of the said independent part of the business.”
It was therefore observed that the aforementioned activity constitutes “Service by transfer of continuing operations as an independent part” and thus in the form of Sl. no. 2 in Notification no. 12/2017-Central tax (rate) dated 28 June 2017, with amendments.” and ruled that the transfer is entitled to exemption from Goods and Services Tax (GST).
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