2026-VIL-208-BOM
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SGST High Court Cases

GST - Assignment of leasehold rights – Petitioner held a long-term lease for an industrial plot and had constructed a factory building on the land. The petitioners later assigned the leasehold rights in the plot to a third party - Department issued a show cause notice demanding GST on the ground that the assignment of leasehold rights amounted to a supply of service in terms of Section 7(1) of the Act of 2017 read with sub-clause (b) of Clause 2 of Schedule II – HELD – The sub-clause(b) of clause 2 of Schedule II indicates any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services. The transaction under question is assignment of leasehold rights by the petitioner in favour of assignee, which admittedly is not a lease nor does it amount to sub-lease. Even the Respondent has recognized this transaction as seeking compensation to transfer rights in favour of the assignee amounting to service classifiable under other miscellaneous services and is taxable at 18% under Sr. No. 35 of the Notification No.11/2017 CT (Rate) dated 28-06-2017. In Court’s view, the petty miscellaneous services like washing, cleaning, dyeing, beauty, physical well-being, etc. cannot be extended to assignment of leasehold rights in an immovable property, to term it to be other miscellaneous services as classified under clause at Sr. No.35 of the Notification – The transaction pertains exclusively to transfer of benefits arising out of an immovable property and has no nexus whatsoever with the business of the petitioner. Consequently, the essential element of supply of service in the course of business or in furtherance of business is completely absent in the instant transaction – Further, the Gujarat High Court in Gujarat Chamber of Commerce and Industry v. Union of India, has held that the assignment of leasehold rights over land and building by an industrial unit to a third party is a transfer of benefits arising out of an immovable property and not a supply of service under the GST Act - The show cause notice and the adjudication order are quashed as assignment of leasehold rights would not be subject to levy of GST under the provisions of the GST Act - The writ petition is allowed
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