Taxability under GST of a Shareholder's Right to Require Purchase of Shares (Put Option)

[Dipika Shetye]

A company has two classes of equity shares, one carrying economic rights and the other carrying voting rights. Under a Shareholders' Agreement certain holders of the economic-rights shares are granted a put option. The put option gives such shareholders the right, but not the obligation, to require another shareholder group to purchase the economic-rights shares held by them at specified terms. No separate consideration is payable to COmpany for grant of the put option.

The issue for consideration is whether the grant of such put option (i.e, the Right to Sell) under the SHA constitutes a supply of services under GST.

AI Summary

Put option rights under shareholder agreements raise GST questions where no separate consideration is paid for granting sale rights.
GST taxability of a put option concerns whether a shareholder's contractual right, without an obligation, to require another shareholder group to purchase specified economic-rights shares constitutes a supply of services. The issue is whether granting that right under a shareholders' agreement is taxable where no separate consideration is paid to the company for its grant.