Asset monetisation: NITI seeks GST waiver for ‘rights to use’ transfers
To enable easier monetisation of assets, the NITI Aayog may seek a waiver of goods and services tax (GST) on ‘Rights to Use’ while transferring an asset to a new entity, following requests from power sector PSUs, officials in the know said.
At present, the transfer of ‘Rights to Use’ is considered a supply under the GST regime, and attracts 18 per cent tax in the hands of the new entity or special purpose vehicle (SPV). For monetisation, assets are carved out into a separate entity or SPV by transferring rights. Such assets are housed in the parent entity’s balance sheet, and need to be separated for monetisation.
With the INR 6-trillion National Asset Monetisation Pipeline (NMP) rolled out last August, public sector enterprises have realised about INR 26,800 crore, with another INR 15,000-16,000 crore to be realised soon by the roads ministry. Some public sector undertakings (PSUs) have reached out to the NITI Aayog, the policy think tank managing the NMP, to seek a GST waiver on transfer of assets.
The 18 per cent GST is seen as a hurdle in acquisition due to additional costs. The NITI Aayog may soon approach the finance ministry to seek a waiver.
While transferring an asset to a separate entity, its value is computed based on its future cash flows. An 18 per cent GST liability will be recovered from the new investor, leading to an additional expense for the private sector participant.
