GST Exemption On Business Transfer as Going Concern: AAR

The West Bengal Authority for Advance Ruling (WBAAR) has ruled that the transfer of business assets and liabilities from a proprietorship firm to a newly incorporated company, when carried out as a going concern, qualifies as an exempt supply under the Goods and Services Tax (GST) law. The bench of Shafeeq S. and Jaydip Kumar Chakrabarti has observed that since the services were provided to the Government of West Bengal through its PHED and were directly linked to functions entrusted to Panchayats and Municipalities under Articles 243G and 243W of the Constitution—particularly drinking water supply—the Authority ruled that these services qualify for GST exemption under Entry 3 of Notification No. 12/2017-Central Tax (Rate). The ruling was delivered in the case of Horizen Edge Technologies Private Limited, a company incorporated to take over the business of a proprietorship concern engaged in digitisation, GIS mapping, monitoring, and technical consultancy services for the Public Health Engineering Directorate (PHED), Government of West Bengal. The authority examined whether the transfer of business assets and liabilities amounted to a taxable supply and whether such transfer could be treated as a “service by way of transfer of a going concern” eligible for exemption under Notification No. 12/2017-Central Tax (Rate). After analysing the financial statements and operational continuity of the transferor entity, the Authority observed that the business demonstrated strong indicators of a going concern, including increasing turnover, healthy profitability, and continued execution of government projects. It noted that except for certain personal assets such as residential and commercial buildings and investments, all business-related assets and liabilities were proposed to be transferred to the applicant company. Relying on Schedule II of the CGST Act and the exemption notification, the Authority held that transfer of a business as a going concern is treated as a supply of service and is specifically exempt from GST. Accordingly, it ruled that the takeover of the business by the applicant company squarely falls under Entry 2 of Notification No. 12/2017 and does not attract GST. A key issue before the Authority was the tax treatment of supplies and invoices raised after the business transfer in relation to work orders originally awarded to the proprietorship concern. The applicant argued that such supplies should retain the same tax treatment as before the transfer. On this aspect, the WBAAR made a clear distinction. It clarified that advance rulings issued earlier in favour of the proprietorship concern would not automatically bind the newly incorporated company, as advance rulings are applicable only to the applicant who sought them and the concerned tax officers. Since the applicant company is a separate legal entity with a different GST registration, earlier rulings could not be extended to it by default. However, the Authority went on to examine a fresh set of work orders placed before it as sample contracts. These related to digital transformation, GIS-based asset mapping, monitoring systems, data validation, application development, and training programmes under the Jal Jeevan Mission and allied water supply initiatives. The Authority found that these activities constituted “pure services,” with no element of works contract or supply of goods involved. Ruling Details Applicant’s Name: Horizen Edge Technologies Private Limited Ruling Date: 09/12/2025 Click Here To Read Ruling Read More: GST Exemption Available on PHED’s Jal Jeevan Mission Support Services: AAR

GST Exemption On Business Transfer as Going Concern: AAR

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