Transfer of leasehold rights in immovable property is not a taxable supply under GST, so the notice was quashed.
Absolute transfer of leasehold rights in an immovable property by a lessee to an assignee is not a supply of service under the GST regime. The Court applied the prior binding view that, although the original GIDC lease and enjoyment of the plot may fall within the inclusive scope of supply, a subsequent assignment of leasehold rights is a transfer of benefits arising out of immovable property and falls outside Section 7(1)(a) of the State GST Act read with Schedule II and Schedule III. GST was therefore not leviable on the assignment, and the show-cause notice could not survive; the writ petition was allowed and the demand proceedings were quashed.
Issues: Whether the assignment and sale of leasehold rights in a GIDC-allotted plot amounts to a taxable supply of service under the GST regime, and whether the resulting show-cause notice issued under the State GST law was sustainable.
Analysis: The Court followed the earlier binding view that a long-term lease granted by GIDC is distinct from a subsequent transfer of leasehold rights by the lessee to a third party. While the original allotment and lease-based enjoyment of the plot may fall within the inclusive scope of supply, the absolute transfer of leasehold rights by the lessee-assignor is a transfer of benefits arising out of immovable property. Such transfer is not treated as a supply of service under Section 7(1)(a) of the State Goods and Service Tax Act, 2017, read with Clause 5(b) of Schedule II and Clause 5 of Schedule III. Consequently, GST is not leviable on such assignment.
Conclusion: The transfer of leasehold rights was not exigible to GST and the impugned show-cause notice could not survive.
Final Conclusion: The writ petition was allowed and the demand proceedings founded on the notice were quashed.
Ratio Decidendi: Absolute transfer of leasehold rights in immovable property by a lessee to an assignee is not a supply of service under the GST law and is outside the charge of GST.
TaxTMI 
AI Drafter ✕
TaxTMI 
