2025 (3) TMI 548 - HC - GST

GST on Leasehold Rights Assignment: Court Aligns with Gujarat HC, Exempts Transactions from GST Under GST Act

Chambers of Small Industries Association & Another Versus The State of Maharashtra through Commissioner of State Tax & Others.

The HC addressed whether GST applies to the assignment of leasehold rights for land and buildings by the lessee to a third party. It aligned with the ... 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. H), 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. H), then the adjudication orders shall also remained stayed. We place the above Writ Petition along with Writ Petition No. 14434 of 2023 on board “for directions” on 10th March, 2025. On that date, we will decide when to fix these matters for hearing and final disposal. Petition disposed off. The issues presented and considered in the judgment are as follows:1. Whether Goods and Service Tax (GST) can be levied 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.2. Interpretation of the provisions of the Central/State Goods and Services Tax Act, 2017 in relation to the assignment of leasehold rights.3. Comparison and consideration of 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) regarding the applicability of GST on similar transactions.The Court noted that the issue raised in the present Petition is similar to the one addressed by the Gujarat High Court, which held that the assignment by sale or transfer of leasehold rights of a plot of land allotted by the Gujarat Industrial Development Corporation (GIDC) to a third party shall not be subject to the levy of GST under the GST Act.The Court found it crucial to address this issue, especially in light of the absence of a contrary view before them. The Court also acknowledged similar petitions, such as Writ Petition No.14434 of 2023 (Siemens Limited v/s. Union of India & Others), where the adjudication of show cause notices remained stayed pending the resolution of this issue.In conclusion, the Court granted leave to the Petitioners to join the Director General of GST Intelligence (DGGI) as a party Respondent and scheduled the matter for further directions and final disposal on a specified date.The significant holdings of the judgment include:- The Court's decision to address the issue of GST levy on the assignment of leasehold rights based on the Gujarat High Court's interpretation.- The stay on the adjudication of show cause notices in related cases pending the final resolution of the issue.- The scheduling of the matter for further directions and final disposal.Overall, the judgment focuses on the interpretation and application of GST laws in the context of the assignment of leasehold rights, drawing on relevant precedents and the need for clarity on this issue.