Transfer Of Fintech App To Subsidiary Is Transfer Of Going Concern: Karnataka AAR


The Karnataka Advance Resolution Authority (AAR) said that GST exemption is available on transfer of an independent part of the business relating to mobile software.

Two member bank MP Ravi Prasad and Kiran Reddy T. observed that the transfer of an independent part of the business related to the “Loan Front” application, a mobile software is qualified as a transfer of business, and the aforementioned activities “through the transfer of the service as an independent company”. part” and is therefore exempt from GST.

The applicant is a Bengaluru based startup aiming to provide data analytics and digital marketing services and is registered under the CGST/KGST Act 2017. The Applicant owns a mobile application, developed and owned by them, called “Loan”. Front,” is a fintech product and is used as a digital platform to facilitate short-term personal loan lending. The applicant intends to transfer the said mobile application software to its wholly-owned subsidiary Vaibhav Vyapaar Private Limited (VVPL).

The petitioner sought a preliminary ruling regarding the determination of the liability to pay tax on the transfer of a part of its business, which is the “Loan Front” application, a mobile software. Accordingly, the application is valid under Section 97(2)(e) of the CGST Act, 2017.

The AAR stated that the transfer of the business relates to the “Loan Front” application to be sold, which is a fully functional part of the business, and the transaction envisages the transfer of the said entire business to a new entity (VVPL). Which would include not only a right over the property, but also the liabilities. Thus, it assumes that the business will continue, because it is decided to transfer the functional part of the business to a new owner in its entirety. Thus, the independent part of the business is transferred.

Name of Applicant: Capfront Technologies Pvt. SL.

Date: 12-12-2022

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