Share Purchase vs Asset Purchase in India: Tax and Liability Differences
A share deal is faster to execute but inherits the target's full liability history, an asset deal is slower and more expensive to structure but lets the buyer cherry-pick what it takes on.
A share purchase transfers the target entity as-is, including every historical liability, tax disputes, pending litigation, undisclosed contingent liabilities, subject only to what the buyer negotiates as indemnities in the SPA. It's typically the faster, operationally simpler route because licenses, contracts, and employee relationships stay intact with the entity.
An asset purchase lets the buyer select specific assets and liabilities to acquire, leaving the rest with the seller entity, cleaner from a risk perspective, but it triggers its own complications: individual asset transfers may require third-party consents (contracts, leases), licenses and registrations often need to be re-applied for rather than transferred, and GST treatment differs from a share deal.
Stamp duty also differs by state and by structure, and can be a meaningful line item either way. The right choice depends more on the target's liability profile and license portability than on any general rule, a target with a clean compliance history often makes a share deal the simpler, cheaper route; one with legacy tax exposure often justifies the extra structuring cost of an asset deal.