Chapter 37

Services by way of Transfer of a going concern

 

Effective date:

(1st July, 2012)

Scope of Exempt Service –

Services by way of transfer of a going concern, as a whole or an independent part thereof.

 

(See Notification no. 25/2012 dated 20.06.2012, effective from 01.07.2012)

 

Clarification by the Board

(Taxation Guide – Guidance Note – 7 – Exemptions dated 20.06.2012)

“7.11.14 I am in the business of running a chain of restaurants. I intend to sell my business. Am I required to pay service tax?

Services by way of transfer of a going concern, as a whole or an independent part thereof, are exempt from service tax. Therefore, you are not required to pay service tax on such sale of your business. Sale of assets of a business that has closed will be outside the definition of “service”

7.11.15 What does the term ‘transfer of a going concern’ mean?

Transfer of a going concern means transfer of a running business which is capable of being carried on by the purchaser as an independent business, but shall not cover mere or predominant transfer of an activity comprising a service. Such sale of business as a whole will comprise comprehensive sale of immovable property, goods and transfer of unexecuted orders, employees, goodwill etc. Since the transfer in title is not merely a transfer in title of either the immovable property or goods or even both it may amount to service and has thus been exempted.”