AAR Holds Business Takeover as “Going Concern Transfer”; Pure Service Work Orders Continue to Enjoy GST Exemption

Horizen Edge Technologies Pvt. Ltd., a newly incorporated company, approached the Authority for Advance Ruling after taking over the business of M/s Horizen, a sole proprietorship engaged in digitalisation and monitoring of public water-supply schemes for the Public Health Engineering Directorate (PHED), Government of West Bengal. As part of the takeover, all operational assets were transferred, excluding only the personal properties. The company proposed to continue the same PHED-related work without interruption, covering GIS-based mapping, Jalmitra application enhancement, data management, and other technical services under the Jal Jeevan Mission.

The applicant argued that the transaction amounted to a transfer of business as an “ongoing concern,” exempt from GST under Sl. No. 2 of Notification 12/2017. It also sought clarity on the GST treatment of ongoing and future PHED work orders, contending that identical services should continue to enjoy exemption as “pure services,” irrespective of the change in legal form.

Main Issue: Whether the takeover qualifies as an exempt transfer of a going concern, and whether PHED-related digital and technical services performed thereafter remain exempt as “pure services” under Articles 243G and 243W.

Authority Ruled: The Authority held that M/s Horizen was an active and viable business at the time of transfer, with ongoing projects, assets, and no indication of winding up. As all business assets and liabilities were transferred and the operations were to continue seamlessly, the transaction satisfied the test of a “going concern” and was exempt from GST under Sl. No. 2 of Notification 12/2017.

The Authority clarified that earlier advance rulings obtained by M/s Horizen could not automatically apply to the transferee, as Section 103 limits their binding effect to the original applicant. However, on examining the fresh sample work orders, it found that the activities including digital mapping, GIS integration, application support, data validation, and JJM-related documentation, were purely service-based and rendered to a State Government department in connection with drinking-water functions. These services therefore qualified for exemption as “pure services” under Sl. No. 3 of Notification 12/2017, so long as their nature remained unchanged.

To Read Full Judgment, Download PDF Given Below