2025 (4) TMI 1281 - HC - GST

Land Rights Transfer: One-Time Payment Doesn't Qualify as Service Supply Under CGST Act Section 9

Bansal Steel Rolling Mills Versus Union of India & Ors

BHC ruled that assignment of leasehold industrial land rights with constructed buildings for a lump-sum is not a 'supply of service' under CGST Act. ... Levy of GST - 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 of the Gujarat High Court in the case of Gujarat Chambers of Commerce and Industry and Others v/s Union of India and Others [2025 (1) TMI 516 - GUJARAT HIGH COURT] has taken a view 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 the third 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 third party (assignee) 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 CGST 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 CGST as provided under Section 9 of the CGST Act. The Gujarat High Court held that the provisions of Section 7 (1) (a) of the CGST 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 CGST as provided under Section 9 of the CGST Act. In the facts of the present case, what is challenged by the Petitioner is the adjudication order passed by Respondent No.4 dated 30th August 2024 and the Rectification Order dated 24th December 2024 passed by the very same Respondent - Place the Writ Petition along with Writ Petition No. 14434 of 2023 and other connected Writ Petitions on 28th April 2025. The Bombay High Court considered whether Goods and Services Tax (GST) applies to the assignment of leasehold rights of land allotted by MIDC, along with buildings constructed by the lessee, to a third party for a lump-sum consideration. The GST Authorities treated this as a 'supply of service' under the CGST Act, 2017.The Court relied on a Division Bench decision of the Gujarat High Court in Gujarat Chambers of Commerce and Industry v. Union of India (2025), which held that such assignment of leasehold rights by the lessee to a third party constitutes a 'transfer of benefits arising out of immovable property' and is not a 'supply' under Section 7(1)(a) read with Schedule II Clause 5(b) and Schedule III Clause 5 of the CGST Act. Consequently, GST under Section 9 of the CGST Act is not leviable on such transactions.Given no contrary authority was presented, the Bombay High Court recognized this as a significant issue warranting consideration. Interim relief was granted by staying the operation of the adjudication order dated 30 August 2024 and the rectification order dated 24 December 2024 issued by Respondent No. 4, pending final disposal. The matter was directed to be heard along with connected writ petitions, including Siemens Limited v. Union of India (Writ Petition No. 14434 of 2023).In sum, the Court indicated that the assignment of leasehold rights of industrial land by the lessee to a third party is not subject to GST as a supply of service under the CGST Act, following the reasoning of the Gujarat High Court.