Leasehold assignment of immovable property is not a GST service when the entire interest is transferred outright.

An outright assignment of the whole leasehold interest in GIDC-allotted land, together with the building and incidental rights, is treated as a transfer of immovable property rather than a supply of services under the GST framework. The initial long-term lease granted by GIDC is a service, but the later assignment by the lessee is materially different because the assignor parts with the entire leasehold bundle and retains no continuing lease or sub-lease interest. Reading the GST Act with the Transfer of Property Act, the Registration Act and the General Clauses Act, the article explains that Schedule II cannot expand taxation where the transaction falls within Schedule III's exclusion for sale of land and building.

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Issues: Whether the assignment and sale of long-term leasehold rights in GIDC-allotted land, together with the building constructed thereon, constitutes a taxable supply of services under the GST Act; and whether GST and consequential input tax credit consequences can be sustained on such transaction.

Analysis: The charging scheme of the GST Act proceeds on the concept of "supply", and Schedule II treats renting of immovable property as a supply of services, while Schedule III excludes sale of land and sale of building from the scope of supply. The Court held that the initial grant of long-term lease by GIDC is a supply of service, but the subsequent assignment by the lessee is materially different: the assignor parts with the whole of its leasehold interest and all incidental rights in the land and building, leaving no continuing right akin to a lease or sub-lease. Reading the GST provisions harmoniously with the Transfer of Property Act, the Registration Act and the General Clauses Act, the Court held that leasehold rights in the present context are a bundle of rights and amount to immovable property or benefits arising out of land. The Court also relied on the legislative setting of GST, the exclusion in Schedule III, and the principle that taxing provisions must be construed strictly; a transaction that is in substance an outright transfer of immovable-property interests cannot be expanded into a supply of services by interpretation. The exemption for GIDC's own long-term leasing activity did not alter the character of the later assignment by private lessees.

Conclusion: The assignment of leasehold rights by the lessee to a third-party assignee is not a taxable supply of services under section 7(1)(a) of the GST Act read with Schedule II and Schedule III, and GST is not leviable on such transaction.

Final Conclusion: The impugned show-cause notices and consequential orders were set aside, and the petitions were allowed.

Ratio Decidendi: An outright assignment of the whole leasehold interest in immovable property is to be treated as transfer of immovable property and not as a supply of services under the GST Act; Schedule II cannot be used to tax such a transfer where the transaction, in substance, falls within the exclusionary ambit of Schedule III.

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