2025 (3) TMI 547 - HC - GST

GST Applicability on Leasehold Rights: Bombay HC Reviews Case, Considers Gujarat HC's Ruling, Adds GST Intelligence Director as Respondent.

TTC MIDC Industries Association & Another Versus Union of India Department of Revenue through the Secretary, Revenue & Others.

The Bombay HC considered whether GST applies to the assignment of leasehold rights of land and buildings for a lump sum. The court consolidated this case ... Levy of GST on the assignment of leasehold rights of a plot of land allotted on lease by the Maharashtra Industrial Development Corporation (MIDC), and the buildings constructed thereon by the lessee to a third party, on the payment of a lump sum consideration - HELD THAT:- The Division Bench decision of the Gujarat High Court in the case of Gujarat Chambers of Commerce and Industry & Others v/s. Union of India & Others [2025 (1) TMI 516 - GUJARAT HIGH COURT] has held that 'the assignment by sale or transfer of leasehold rights of the plot of land allotted by the Gujarat Industrial Development Corporation (GIDC) to the lessee or its successor (assignor) in favour of a 3rd party (assignee) for consideration, shall be an assignment/sale/ transfer of benefits arising out of “immovable property” by the lessee-assignor in favour of a 3rd party who would then become a lessee of GIDC in place of the original allottee-lessee. In such circumstances, the Gujarat High Court held that the provisions of Section 7 (1) (a) of the GST Act providing for scope of supply read with clause 5 (b) of Schedule II and clause 5 of Schedule III would not be applicable to such a transaction and the same would not be subject to levy of GST as provided under Section 9 of the GST Act.' In all these cases (listed at Exh. E), where any show cause notice has been issued and not adjudicated, the adjudication of the show cause notice, shall remained stayed. If any adjudication orders have already been passed, (in relation to the entities mentioned at Exh. E), then the adjudication orders shall also remained stayed. We place the above Writ Petition along with Writ Petition No. 14434 of 2023 and Writ Petition No. 16665 of 2024 on board “for directions” on 10th March, 2025. On that date, we will decide when to fix these matters for hearing and final disposal. The issue in the present case before the Bombay High Court revolves around whether Goods and Service Tax (GST) can be levied on the assignment of leasehold rights of a plot of land and buildings constructed thereon by the lessee to a third party for a lump sum consideration. The GST Authorities argue that this transaction constitutes a supply of service under the Central/State Goods and Services Tax Act, 2017. The Petitioners rely on a Division Bench decision of the Gujarat High Court in a similar case to support their position.The Gujarat High Court had previously held that the assignment or transfer of leasehold rights of a plot of land allotted by the Gujarat Industrial Development Corporation to a third party for consideration does not fall within the scope of GST levy. The court reasoned that such transactions involve the transfer of benefits arising from immovable property and are not subject to GST under the relevant provisions of the GST Act.The Bombay High Court, noting the absence of any contrary view and the importance of the issue, decided to address the matter. The court also acknowledged that similar issues had been raised in other petitions, including one involving Siemens Limited, where adjudication of show cause notices had been stayed. The court consolidated the present petition with other related cases for further directions and set a date for hearing and final disposal.In summary, the Bombay High Court granted leave to join the Director General of GST Intelligence as a party respondent, recognized the key issue regarding the levy of GST on the assignment of leasehold rights, and scheduled the matter for further proceedings along with related petitions. The court's decision to address the issue in light of the Gujarat High Court's ruling indicates the significance of the legal question at hand.