Transfer of leasehold rights in industrial plot falls outside GST supply, making the demand unsustainable.

Assignment by sale and transfer of leasehold rights in an industrial plot was treated as a transfer of benefits arising from immovable property, not as a taxable supply of service under the State GST law. The transaction was considered outside section 7(1)(a), not covered by clause 5(b) of Schedule II, and within the exclusion reflected in clause 5 of Schedule III. On that basis, the GST levy under section 9 on the transfer of leasehold rights was unsustainable, and the show-cause notice and consequential demand order were quashed.

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Issues: Whether the assignment by sale and transfer of leasehold rights in an industrial plot allotted by the GIDC constituted a taxable supply of service under the State Goods and Services Tax Act, 2017, and whether the impugned GST demand and consequential order were sustainable.

Analysis: The assignment of leasehold rights by the lessee in favour of a third-party assignee was held to be a transfer of benefits arising out of immovable property and not a mere service of grant of right to occupy or possess. Such transaction was held to fall outside the scope of supply under section 7(1)(a) of the Act and not to be covered by clause 5(b) of Schedule II. In view of clause 5 of Schedule III, sale of land and transactions of the same character were treated as outside the ambit of supply. Consequently, the levy under section 9 could not be sustained on the impugned transfer of leasehold rights.

Conclusion: The impugned show-cause notice and order confirming GST liability on transfer of leasehold rights were quashed and set aside, and the petition was allowed.

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