The Maharashtra Authority for Advance Rulings (AAR) held that General Motors India is liable to pay 18% GST on the assignment or transfer of leasehold land by General Motors India to Hyundai Motor India Ltd (HMIL).
General Motors India had applied to Maharashtra AAR seeking tax clarity citing whether its proposed transfer of existing leasehold land to HMIL via an Asset Purchase Agreement (APA) would attract tax liability under GST, specifically under the category of 'Other miscellaneous services' (SAC 999792).
According to the advance ruling, General Motors is considering the transfer of assets at its Talegaon facility — including leasehold industrial land, buildings, and plant and machinery — valued at ?787 crore, to Hyundai Motor India.
As per the order copy accessed by CNBC-TV18, transfer of land lease rights have been charged by GM at ?529.29 crore, plant and machinery at ?45 crore and building at ?214.36 crore. And the total deal is worth ?787.18 crore.
As General Motors has ceased its manufacturing operations and is no longer a concern, the AAR ruled that the transaction is not a sale of immovable property under Section 54 of the Transfer of Property Act, 1882. Instead, it constitutes an agreement to transfer rights. The industrial plot was leased by the Maharashtra Industrial Development Corporation (MIDC) for 95 years with conditional possession, no absolute title, and any transfer is subject to MIDC’s written consent.
While rejecting the claim that the transaction should not attract GST, the AAR ruled that not only the leasehold land but also the buildings, plant and machinery involved in the transaction are subject to 18% GST.
"Yes, assignment of Lease Hold Rights of land by applicant in terms of the Asset Purchase Agreement qualifies as taxable supply of services under GST Laws. GST would apply on the price agreed for the transfer of Lease Hold Rights under the Asset Purchase Agreement. The activity of the assignment is in the nature of agreeing to do the transfer of the applicant's leasehold rights in favour of the assignee. It is a service classifiable under the "Other Miscellaneous Service (SAC 999792) and taxable at 18% under SL. No 35 of Notification No. 11/2017 - CT (Rate) dated 28/06/2017, as amended from time to time," the order read.
The ruling was delivered by Priya Jadhav (Member – Central Tax) and DP Gojamgunde (Member – State Tax).
Given the transaction's value of ?787 crore, the estimated GST liability amounts to ?141 crore, according to tax experts.
Commenting on the ruling, Sandeep Sehgal, Partner – Tax, AKM Global, said, "The recent ruling by the Maharashtra AAR in the case of General Motors India and Hyundai Motor India Ltd 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% 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. Importantly, the ruling also clarifies that 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."
"If we consider the deal contours mentioned in the order, the total tax outgo on the nature deal comes out to be approximately Rs 141 crore, when charged at 18%," says Sehgal.
However, experts also point out the inconsistency in rulings across jurisdictions. A similar transaction was recently held not taxable by the Gujarat High Court, highlighting judicial divergence.
Abhishek A Rastogi, founder of Rastogi Chambers, who is representing petitioners in similar ongoing litigation before the Bombay High Court and other forums, added, "The taxability of assignments of leasehold rights must be examined through multiple legal and constitutional lenses. A critical starting point is Entry 49 of List II (State List) under the Seventh Schedule of the Constitution, which empowers states to levy taxes on lands and buildings. This framework raises complex questions regarding the scope and applicability of such taxes when it comes to lease transactions."
Rastogi also raised the issue of double taxation: "An additional concern is the possibility of a double tax burden. In many such cases, stamp duty, a state-imposed levy on the execution of instruments involving immovable property, is also applicable, thereby compounding the tax liability for the parties involved. A lease of immovable property constitutes an interest in land and building. Consequently, such transactions fall within the ambit of the 'transfer of immovable property' as defined under Section 54 of the Transfer of Property Act, 1882. This legal characterisation has significant implications for how these transactions are taxed and regulated."
He further explained the multi-dimensional legal approach adopted in court: "When these matters came before high courts, we argued the issues not merely from a statutory interpretation standpoint but also with reference to the legislative intent, the constitutional allocation of powers, and related legal provisions. This included an analysis of instruments such as the General Clauses Act, which provides a broader definitional context for terms like 'immovable property'."
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