NITI Aayog Seeks GST Waiver for ‘Rights to Use’ Transfers


The NITI Aayog may soon approach the Finance Ministry to seek a waiver of goods and services tax (GST) on ‘Rights to Use’ while transferring an asset to a new entity.

At present, the transfer of ‘Rights to Use’ transfer attracts 18 per cent tax in the hands of the new entity or special purpose vehicle (SPV). As for monetisation, assets are carved out into a separate entity or SPV by transferring rights. While, some public sector undertakings (PSUs) from power sector have reached out to the NITI Aayog to seek a GST waiver on transfer of assets, officials in the know said.

Imposing GST on the transfer of ‘Rights to Use’ puts an additional burden on investors. Further, restructuring of the power generation ecosystem would also need replica amendments in GST laws so as to provide a tax neutral status, said Rajat Mohan, senior partner at AMRG & Associates.

In this regard, the National Monetisation Pipeline (NMP) document states that monetisation of assets may require a scheme of arrangement or demerger which may pose associated transaction overheads such as continuation of tax holiday on assets, capital gains tax, stamp duty, among others, due to asset transfer. The NMP document had also suggested structuring the transaction as revenue rights as against transfer of assets into an SPV will be tax efficient.

However, the last Union Budget had provided a tax waiver under the Income Tax Act. With the Rs 6-trillion NMP rolled out last August, PSUs have realised about Rs 26,800 crore, with another Rs 15,000-16,000 crore to be realised soon by the roads ministry. But, the 18 per cent GST is seen as a hurdle in acquisition due to additional costs.


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