Slump Sale & Going Concern Transfer India: The Process, Start to Finish
The mechanics of Slump Sale & Going Concern Transfer India are what clients ask about once they have decided to proceed. The questions below are the ones raised most often in practice; the full scope of the service is on the Slump Sale & Going Concern Transfer India page.
What is the difference between a slump sale and a 'transfer of business as a going concern'?
They generally describe the same commercial transaction from two different regulatory lenses. 'Slump sale' is the Income-tax Act's term (Section 2(42C)) focused on how capital gains are computed. 'Transfer of business as a going concern' is the language used in the GST exemption under Notification 12/2017-Central Tax (Rate), focused on whether GST applies to the transfer. A well-structured transaction satisfies both tests simultaneously — lump sum consideration for income tax purposes, and genuine business continuity for GST purposes.
In practice: A transaction can qualify as a slump sale for income tax but fail the 'going concern' test for GST if the buyer does not actually continue the same business — for example, acquiring the assets only to shut the unit down and redeploy the assets elsewhere. The two tests are related but not automatically identical.
How is the tax on a slump sale actually computed?
Under Section 50B of the Income-tax Act 1961 (which governs slump sales up to FY 2025-26; from tax year 2026-27 the Income-tax Act 2025 applies with renumbered sections, as covered in the FAQ on the Income-tax Act 2025 below), the capital gain is the lump sum consideration received minus the 'net worth' of the undertaking transferred. Net worth is the aggregate value of the total assets of the undertaking minus the value of its liabilities as they appear in the books of account — but the assets are valued on prescribed bases: depreciable assets at the written down value of the block of assets determined under Section 43(6)(c)(i)(C), other capital assets at their price of acquisition, and any revaluation is ignored, so self-generated goodwill and other self-generated intangibles generally carry a NIL value. Since the Finance Act 2021, if the Fair Market Value of the undertaking computed under Rule 11UAE exceeds the actual consideration, that FMV is deemed to be the full value of consideration for the capital gains computation.
In practice: Founders often forget that self-generated goodwill counts as NIL in the net worth computation — meaning a business with substantial unrecorded brand value will show a very low net worth, resulting in a larger taxable capital gain than they expected. We model this early so there are no surprises at computation time.
Is the capital gain from a slump sale long-term or short-term?
It depends on how long the undertaking has existed and been held as a going concern — not the individual holding period of each asset within it. If the undertaking was held for more than 36 months, the gain is a long-term capital gain; otherwise it is short-term. This is a distinct rule from the general capital asset holding period tests that apply to shares, immovable property, or individual depreciable assets.
In practice: We assess the undertaking's continuous existence carefully — if a business was significantly reorganised, merged into, or newly commenced within the group in the last 3 years, the holding period test can be more nuanced than a simple 'incorporation date' check.
What is Form GST ITC-02 and when is it needed?
Form GST ITC-02 is used to transfer unutilised input tax credit from the transferor's electronic credit ledger to the transferee's electronic credit ledger when a business is transferred as a going concern (including on account of sale, merger, demerger, amalgamation, lease, or transfer of business). The transferor files the form on the GST portal, and the transferee must accept it for the credit to reflect in their ledger. This is a separate process from the GST exemption itself.
In practice: ITC-02 needs action from both parties: the transferor's filing (with the accountant's certificate that Rule 41 requires) and the transferee's acceptance. We track this as a specific post-closing action item because it is easy to overlook.
Can a slump sale happen between two companies in the same corporate group?
Yes — intra-group slump sales are a common group restructuring tool, used to carve a business unit out of one group entity and place it in another (for example, to ring-fence liabilities, prepare a unit for a separate fundraise, or simplify a group structure ahead of an IPO). The same Section 50B tax computation, Section 180(1)(a) approval requirement (if applicable), and GST going-concern test apply regardless of whether the buyer is a related party — related-party transactions additionally attract scrutiny on whether the consideration reflects fair value, and transfer pricing documentation may be relevant if either entity has cross-border links.
In practice: Related-party slump sales invite closer valuation scrutiny from tax authorities precisely because the parties are not at arm's length in the way an unrelated buyer and seller would be. We build a more rigorous valuation file for intra-group transactions for this reason.
Does the Income Tax Act, 2025 change how slump sales are taxed?
The Income-tax Act, 1961 has been replaced by the Income Tax Act, 2025, effective 1 April 2026. The government's stated intent for the new Act was continuity of substantive tax policy with renumbered and simplified sections and language — the slump sale definition, the net-worth-based capital gains computation, and the FMV-deeming rule are expected to carry forward in substance, but under renumbered section and rule references rather than the familiar Section 2(42C)/50B/Rule 11UAE citations from the 1961 Act. Because the transition is recent, we treat the underlying commercial and tax logic in this guide as reliable, but always confirm the exact current section/rule citation applicable to your transaction date at the time of engagement, rather than assuming the old numbering still applies for transactions effective after the changeover.
In practice: For any slump sale effective on or after 1 April 2026, we verify the corresponding Income Tax Act 2025 provisions and current CBDT guidance before finalising the tax computation — we do not rely on 1961 Act section numbers as a substitute for checking the current law at the time of your transaction.
How is the consideration for a slump sale determined — can the parties agree on any price?
Commercially, the parties negotiate the price, but for tax purposes the actual consideration cannot simply be set arbitrarily low to minimise capital gains. Rule 11UAE of the Income-tax Rules prescribes a Fair Market Value methodology for the undertaking, and since the Finance Act 2021, if this computed FMV exceeds the actual consideration agreed, the FMV — not the lower agreed price — is deemed to be the full value of consideration for computing capital gains. This closes the gap where parties could previously agree an artificially low price to reduce the seller's tax.
In practice: We run the Rule 11UAE computation early in structuring, alongside the commercial valuation, so the parties know upfront whether the negotiated price and the tax-deemed FMV are aligned — surprises here late in a transaction are expensive to unwind.
How does a slump sale interact with existing loan or lease agreements tied to the undertaking?
Most loan agreements, equipment leases, and property leases contain change-of-control or assignment restriction clauses requiring lender or lessor consent before the underlying contract can be assigned to a new party. A slump sale does not automatically transfer these contracts without such consent — attempting to do so can trigger a default under the existing agreement. We review every material contract associated with the undertaking during due diligence specifically for these clauses, and sequence consent-seeking well ahead of the planned closing date.
In practice: Lender consent processes, in particular, can take weeks and sometimes require restructuring the underlying facility. We treat this as a critical-path item in the transaction timeline, not something to address after the BTA is signed.
How long does a typical slump sale transaction take from term sheet to closing?
For a straightforward mid-sized undertaking with reasonably clean records, no foreign party, and no sector-regulator approval requirement: the timeline depends on the case and runs from a signed term sheet or LOI through structuring, valuation, due diligence, documentation, approvals, and closing. Transactions involving cross-border FEMA compliance, distressed or IBC-context sales, significant creditor consents, or regulated-sector approvals routinely take longer — sometimes 6 months or more.
In practice: We give clients a transaction-specific timeline after the initial structuring assessment rather than a generic estimate — the biggest timeline variables are usually third-party consents (lenders, key customers with change-of-control clauses) and non-transferable licence re-applications, not the tax or legal documentation itself.
Where this sits in the wider engagement
Slump Sale & Going Concern Transfer India rarely arrives on its own. The statutory basis and the current requirements are set out on the Slump Sale & Going Concern Transfer India service page, and the related services are grouped under Conversion Closure.
What PNPC does
PNPC Global has practised since 1986 across India and the UAE. On Slump Sale & Going Concern Transfer India we take the work end to end — reviewing the facts, preparing and filing what is required, and dealing with the authority through to closure.