The BOT transfer: share purchase vs slump sale, FEMA, GST and tax

At the end of a Build-Operate-Transfer (BOT) engagement, the client takes ownership of its India capability centre in one of two ways. If the centre was built inside a dedicated Indian company, the client buys the shares of that company: a share purchase. If the centre was run as a ring-fenced unit inside the provider's own company, the client buys the business itself, usually as a business transfer or slump sale.

That choice decides which FEMA filings apply, whether GST arises, how the provider is taxed on its gain, and what happens to employees, leases and contracts. It should be settled when the BOT contract is signed, years before the transfer date. This guide covers each point for a CFO or general counsel preparing for the BOT transfer of a GCC in India.

The structure is chosen on day one

Morgan Lewis describes three ways to structure a BOT so that the transfer works (Morgan Lewis, Jun 2024):

• Asset-based: the provider runs the centre inside its own company and hands over the assets, staff and contracts at the end.
• Provider-owned entity with a call option: the provider sets up a separate Indian company, and the client holds an option to buy 100% of its shares.
• Joint venture: the client and provider co-own the entity, and the client buys out the provider's stake.

The same firm lists choosing the wrong structure at the start among the main BOT risks. The asset-based route ends in a business transfer. The call-option and joint-venture routes end in a share purchase. If you are still deciding how the earlier phases run, our guide to BOT for GCCs in India, phase by phase covers build and operate.

Most clients who plan to own the centre long term prefer the dedicated-entity route. A wholly owned private limited company is the usual end-state vehicle for a BOT because its equity transfers cleanly (Legal 500 (IMC), May 2026).

Share purchase vs business transfer at a glance

The core distinction (SPV route simpler with many employees and assets but needing due diligence on the SPV; slump sale heavier on tax and stamp duty but letting the buyer choose assets) comes from practitioner guidance, including a BOT provider's guide from Wisemonk and a note from Chandhiok & Mahajan via Legal 500.

In Indian tax terms, a slump sale is the sale of a whole undertaking for a lump-sum price, without separate values assigned to each asset. A business transfer that is not a slump sale can still be done as an itemized sale of assets, but the tax position is different, so your adviser should confirm which one the contract creates.

One practical point follows from the table. In a business transfer, the client normally needs its own Indian company in place to receive the business, hire the staff and sign the lease. That company has to be incorporated, funded and registered before the transfer date, which adds lead time the share route avoids.

FEMA: pricing, reporting and the paper trail

FEMA problems at transfer usually start years earlier. IMC's guidance via Legal 500 is to classify every inflow into the Indian entity during the BOT (equity, reimbursement or operational funding) and report it, including Form FC-GPR for share issues. If the shareholding or valuation changes at transfer, the reporting has to be redone. Where the contract terms and the actual fund flows diverge, authorized dealer banks hold things up (Legal 500 (IMC), May 2026).

For a share purchase, the sale of the SPV's shares by an Indian resident to a non-resident buyer is generally understood to require a price at or above fair value, supported by a valuation certified at the time of transfer, and reporting in Form FC-TRS through the authorized dealer bank. We have not verified the current pricing and filing rules against the primary text for this article. Treat them as the first thing to confirm with counsel, including the filing deadline and who files.

If that pricing floor applies, it has a direct commercial consequence. A BOT contract often fixes the transfer price, or a formula for it, years in advance. If the agreed price falls below the certified fair value on the transfer date, the deal cannot close at that price. Build an adjustment mechanism into the contract, and commission the valuation early enough to resolve any gap before the target date.

For a business transfer, the FEMA work sits mainly with the client's own Indian company. The parent funds it, the inflow is classified and reported, and FC-GPR is due within 30 days of a share allotment (TaxAJ, Oct 2026).

IMC also names valuation disputes over assets, employees and IP as a risk that can delay or unwind a transfer. The fix is the same as for the pricing floor: agree the valuation method in the contract, not at the end.

GST on the transfer

For a business transfer, Bar & Bench (ALMT Legal) notes that a transfer of a going concern is likely exempt from GST (Bar & Bench, Jun 2026). The words that matter are "going concern". The more the deal looks like a sale of selected assets, and the less like the hand-over of a running business with its people and contracts, the weaker that position becomes. Have your adviser confirm the treatment for the exact package you are buying.

In a share purchase, the operating company keeps its own GST registration and its export position. The question shifts to keeping those in good order under the new owner. Services to the overseas parent can be zero-rated exports if the IGST conditions are met, and the company needs a letter of undertaking (LUT) on file each financial year to export without paying IGST (TaxAJ, Oct 2026). Check that the LUT, refund claims and export documentation are current before closing.

Income tax: the provider's gain is part of your price

Whichever route you take, the provider realizes a gain when it sells the shares or the business, and it pays tax on that gain. Bar & Bench's advice is that the provider's capital gains on transfer should be priced into the BOT fee from the start (Bar & Bench, Jun 2026). If it is not, the cost reappears at the end as a higher transfer fee or a dispute.

Ask for the tax cost of each transfer route to be modeled before you sign. A business transfer generally carries more tax and stamp duty than a share sale, and that difference lands in your price either way.

Morgan Lewis notes that the transfer stage may also carry employee transfer fees or facility usage fees, on top of the fixed build fee and FTE-based operate fee common earlier in the engagement (Morgan Lewis, Mar 2025). List every transfer-stage charge in the contract.

One drafting point is new. The Income-tax Act 2025 replaced the 1961 Act from 1 April 2026, and section numbers changed (Bar & Bench, Jun 2026; TaxAJ, Oct 2026). BOT templates and tax memos written before then may cite provisions that no longer exist under those numbers.

Transfer pricing and recharacterization risk

The transfer itself is typically not a transaction caught by the transfer-pricing chapter. The risk is earlier. If the client group controls the provider too closely during operate, the tax authorities may recharacterize the arrangement, so the provider's independence has to be maintained and documented (Bar & Bench, Jun 2026).

In practice that means the provider runs the entity as a real service provider: its own management decisions, its own payroll and vendor contracts, and fees that follow the contract. Board minutes, approvals and invoices should show that pattern.

After transfer, the Indian company becomes a related party of the parent and bills it on a cost-plus basis. That brings the 2026 safe-harbour rules into play, covered in our post on GCC transfer pricing and the 2026 safe harbour.

Permanent establishment risk before transfer

A BOT partner that negotiates or concludes contracts on the investor's behalf can create a permanent establishment (PE) for the investor in India (Legal 500 (Sagus Legal), Oct 2026). Bar & Bench identifies agency PE as the form most relevant before transfer (Bar & Bench, Jun 2026).

The controls are simple to state and easy to let slip. Provider staff should not negotiate or sign customer or vendor contracts for the parent. The written contract and the way people actually work should match. Keep the records that show both, because a PE review looks at conduct as well as paper.

Leases, SEZ units and other contracts

If the client will keep the office, the lease must be assignable, and SEZ bonding requirements can affect the timing of the transfer (Morgan Lewis, Mar 2025). Negotiate assignment rights in the lease when it is first signed. A landlord asked for consent at the end of the operate phase can set its own price.

In a share purchase the lease stays with the company, but read it for change-of-control clauses that require notice or consent. In a business transfer, every lease, license and supplier contract the client wants must be assigned or novated, and each counterparty may need to agree.

SEZ units carry their own approvals and reporting (TaxAJ, Oct 2026). If the centre sits in an SEZ, add the SEZ authority's process to the transfer timeline.

The order of steps

IMC sets out a sequence for the ownership transfer (Legal 500 (IMC), May 2026):

1. Share transfer or equity issuance.
2. Assignment of contracts.
3. Migration of IP.
4. Onboarding of employees under the parent's governance.

A transitional services agreement (TSA) usually follows, covering anything the provider still supplies after the handover (Morgan Lewis, Jun 2024). Preparation should start well before the transfer date. One BOT provider recommends beginning it mid-way through the operate phase (Wisemonk, Oct 2026).

The employee step deserves its own plan, especially in a business transfer. Our post on moving employees at transfer under India's new labour codes covers continuity of service, gratuity and PF.

What the transfer clause must specify

Practitioner guides published by BOT providers describe a vague transfer clause, one that does not say exactly what transfers, as the single biggest BOT risk. A workable clause should state:

• The transfer route: share purchase or business transfer, and the entity that will buy.
• The triggers: the date, headcount, option window or other events that start the transfer, and who can trigger it.
• The price mechanism: a fixed fee, a multiple or book value, with an adjustment if the FEMA fair-value floor is higher.
• The valuation method, the valuer and the timing of the certificate.
• Exactly what transfers: employees, leases, EPFO accounts, contracts, licenses, equipment, data and IP.
• Who bears each tax and duty, including the provider's capital gains and stamp duty.
• Who prepares and files each FEMA form, and by when.
• Employee terms: continuity of service, accrued gratuity and leave, and any transfer fee.
• The TSA: which services continue, for how long and at what price.
• Data protection roles before and after transfer, covered in our post on the DPDP Act and your India GCC.
• How valuation or scope disputes are resolved without stopping the transfer.

Each item is easier to agree at signature, when both sides want the deal, than at the end, when the provider is losing a revenue stream.

Where to start

Onfocus already recruits and runs engineering teams for clients in fintech, banking and Web3. In a BOT engagement we agree the transfer route, the valuation approach and the list of what transfers in the contract itself, and we work alongside your Indian counsel and chartered accountant on the filings. You can see how the model is set up on our Build-Operate-Transfer page.

This article is general information, not legal or tax advice. Confirm the details for your situation with Indian counsel and a chartered accountant.

Frequently asked questions

How is a GCC transferred to the client at the end of a BOT engagement?

If the centre sits in a dedicated Indian company, the client buys that company's shares. If it was run as a ring-fenced unit inside the provider's own company, the client buys the business, usually as a business transfer or slump sale. The route should be fixed when the BOT contract is signed.

Is a share purchase or a slump sale better for a BOT transfer?

A share purchase is generally simpler, especially when there are many employees and assets, and carries lighter tax and stamp duty, but the buyer needs due diligence on the company itself. A slump sale lets the buyer choose which assets to take, at a higher tax and stamp duty cost.

Is GST payable on a BOT transfer in India?

A business transfer as a going concern is likely exempt from GST, provided it really is the hand-over of a running business with its people and contracts rather than a sale of selected assets. In a share purchase the operating company keeps its own GST registration and export position. Confirm the treatment with an adviser.

What FEMA filings apply when a GCC is transferred?

Every inflow into the Indian entity should be classified and reported during the BOT, and the reporting is redone if the shareholding or valuation changes at transfer. A share sale to a non-resident is generally understood to require fair-value pricing and a Form FC-TRS filing, which should be confirmed with counsel.

Who bears the provider's capital gains tax on transfer?

The provider pays tax on its gain, but the cost reaches the client through pricing. Legal commentary recommends pricing the provider's capital gains into the BOT fee from the start, so the cost does not resurface as a higher transfer fee or a dispute.