Assignment of leasehold rights: not a taxable supply of services under GST where transfer extinguishes grantor's rights, SCN invalid.

Assignment of long-term leasehold rights that extinguishes the transferor's rights and transfers the benefits of immovable property is not a supply of services under the GST framework; the analysis construes the scope of "supply" and the entries in Schedule II and distinguishes commercial assignment from petty/miscellaneous services. Where the assignment has no nexus with the assignor's business, it constitutes transfer of benefits of immovable property and falls outside taxable services. Consequently, a show-cause notice issued demanding tax, interest and recovery under the relevant recovery provision is unsustainable and was quashed in favour of the assessee.

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Issues: Whether the assignment/transfer of leasehold rights (with prior consent of the lessor) constitutes a supply of services attracting GST and whether the show cause notice issued under Section 74(1) of the Central Goods and Services Tax Act, 2017 demanding tax, interest and recovery is sustainable.

Analysis: The Court examined the scope of "supply" under Section 7(1) of the Central Goods and Services Tax Act, 2017 and the entries in Schedule II, including Clause 2(b) which treats lease or letting out of a building as supply of services. The Court noted that the transaction in question is an assignment of long-term leasehold rights (95 years) which extinguishes the transferor's rights and transfers the benefits arising out of immovable property. The Court contrasted classification of petty or miscellaneous services (as exemplified in the rate Notification No. 11/2017-C.T. (Rate) dated 28-06-2017) with the commercial reality of assignment of leasehold rights and found the former inapplicable. The Court applied the reasoning of the Gujarat High Court (considering statutory provisions including annotation of exemptions in Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017) that assignment/sale/transfer of leasehold rights of land and building constitutes transfer of benefits arising out of immovable property and is not a supply of services in the course or furtherance of business where the assignment has no nexus with the assignor's business.

Conclusion: The assignment of leasehold rights does not amount to a supply of services attracting GST; the show cause notice issued under Section 74(1) is unlawful and is quashed. The result is in favour of the assessee.

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