Transfer of leasehold land, factory, building, plant, machinery by General Motors to Hyundai taxable: Maharashtra AAR

Employees working inside the General Motors plant in Talegaon (file photo)
| Photo Credit:
REUTERS

Maharashtra’s Authority for Advance Ruling (MAAR) has held that the assignment of leasehold land by General Motors India (GMI) to Hyundai Motor India Ltd (HMIL) through asset purchase agreement (APA) is taxable, and thus will attract 18 per cent GST.

The advance ruling was sought by GMI after it decided to transfer various assets at its Talegaon (Maharashtra) plant to HMIL. These include transfer of land lease rights for over ₹529 crore, sale of over 9,600 items of plant and machinery at a cumulative value of over ₹43 crore, and 42 buildings for over ₹214 crore – amounting to a total of ₹787 crore.

“GST would apply on the price agreed for transfer of Lease Hold Rights under the asset purchase agreement,” a division bench of MAAR said in a recent ruling. Further, transfer of buildings will also be considered as leasehold agreement and attract 18 per GST. The sale of items of plant and machinery, however, will be categorised as supply of goods. “GST would apply on the price agreed between the parties for the sale of each item,” the bench said. Input Tax Credit (ITC) will be deducted from the final tax liability.

MIDC consent

MAAR held that such an activity has to do with transfer of applicant’s rights and not the sale of the immovable property, as the industrial plot was leased by the Maharashtra Industrial Development Corporation (MIDC) for 95 years. The bench noted that the plot was leased out on conditional possession, and transfer to any assignee would require MIDC’s written consent.

On the sale of buildings, MAAR rejected GMI’s contention that the transfer of the same amounts to sale, and is outside the scope of GST.

According to Sandeep Sehgal, Partner-Tax with AKM Global, the present ruling is a significant precedent for the treatment of industrial asset transfers under GST. “The AAR‘s classification of leasehold land assignment as a taxable service under SAC 999792, attracting 18 per cent GST, reaffirms the principle that leasehold rights—even for long durations—do not equate to a transfer of immovable property when title and ownership remain with a statutory body such as MIDC,” he said.

The ruling also clarifies that the exemptions applicable to initial allotments by government authorities do not extend to subsequent assignments, thereby widening the GST net on industrial relocations and asset divestments.

“This decision underscores the critical need for corporations to structure asset sale agreements with clear segmentation of movable and immovable assets, while also conducting thorough tax due diligence on lease terms and transferability conditions,” said Sehgal.

Published on April 11, 2025