The transfer of Talegaon, Maharashtra, land by General Motors India to Hyundai Motor India Ltd (HMIL) is liable to 18% GST, the advance ruling authority of the state has said in a recent order.
The ruling comes in the context of transfer of GM’s `787 crore worth of Talegaon facility assets (leasehold industrial plot, buildings, and plant and machinery) to HMIL after the former stopped manufacturing activities and business as a going-concern.
The advance ruling authority rejected GM’s contention that transfer of land and buildings amounts to sale, and is therefore outside the scope of GST. It argued that the industrial plot was leased by Maharashtra Industrial Development Corporation (MIDC) for 95 years, with conditional possession, no absolute title and its transfer to any assignee requires MIDC’s prior written consent.
According to Sandeep Sehgal,partner-tax, AKM Global, a tax and consulting firm, “The recent ruling by the Maharashtra Authority for Advance Rulings (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.” According to him, the AAR’s classification of leasehold land assignment as a taxable service, 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.
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