2026 (3) TMI 194 - HC - GST

Transfer of Leasehold Rights not a supply of services; GST not leviable where benefits of immovable property are transferred.

Whether assignment of long-term (95-year) leasehold rights constitutes a taxable supply under the Maharashtra GST framework was analysed by reference to ... Assignment of leasehold rights for 95 years - scope of supply and land/building transactions​​​​​​​ - Transfer of benefits arising out of immovable property - miscellaneous service under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and issued notice under Section 75 read with Section 73(5) of the Maharashtra Act, 2017. Assignment of leasehold rights - Transfer of benefits arising out of immovable property - HELD THAT: - The Court examined whether the assignment of the petitioner's leasehold rights to a third party amounted to a supply of services within the meaning of Section 7(1) read with Schedule II. The lease in question is a long-term lease (95 years) and the leasehold rights are transferable under the lease deed. The transaction extinguished the petitioner's rights and transferred the benefits arising out of immovable property to the assignee. The transaction therefore constituted transfer of benefits arising out of immovable property rather than a provision of services in the course or furtherance of the petitioner's business. The Court relied on and followed the reasoning of the Gujarat High Court in the case of Gujarat Chamber of Commerce and Industry Vs. Union of India [2025 (1) TMI 516 - GUJARAT HIGH COURT], which held that assignment/sale/transfer of leasehold rights of an allotted plot by a lessee to a third-party assignee is an assignment of benefits arising out of immovable property and is not subject to GST as a supply of services. The absence of any nexus with the petitioner's business and the nature of the long-term lease were treated as determinative factors. [Paras 10, 11, 12, 13, 14] Assignment of the leasehold rights is not a taxable supply of services under the GST Act. Classification as other miscellaneous services unlawful - The impugned show-cause notice treating the assignment as 'other miscellaneous services' taxable at 18% was legally unsustainable. - HELD THAT: - The respondents had classified the assignment as a service falling under miscellaneous services (Sr. No. 35 of Notification No. 11/2017 CT (Rate)) and contended it was taxable at 18%. The Court observed that the examples listed under 'other miscellaneous services' relate to petty service activities and cannot be extended to encompass transfer/assignment of leasehold rights in immovable property. Because the transaction was a transfer of benefits arising out of immovable property and not a service provided in the course or furtherance of the petitioner's business, the classification adopted in the show-cause notice was invalid and rendered the notice bad in law on that count. [Paras 6, 7, 8, 9] The classification of the assignment as other miscellaneous services and the consequent show-cause notice seeking GST on that basis is invalid. Final Conclusion: The writ petition was allowed: the impugned order arising from the show-cause notice was quashed and set aside, the assignment of leasehold rights was held not to be a taxable supply of services and the classification as other miscellaneous services was rejected. Issues: Whether assignment/transfer of leasehold rights (95 year lease) by the lessee for consideration amounts to a supply of services attracting GST under the Maharashtra Goods and Services Tax Act, 2017 and related notifications.Analysis: The Court examined Section 7(1) and Schedule II (Clause 2(b)) of the Maharashtra Goods and Services Tax Act, 2017 which deal with scope of supply and land/building transactions. The respondents treated the assignment as a taxable miscellaneous service under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and issued notice under Section 75 read with Section 73(5) of the Maharashtra Act, 2017. The Court analysed the nature of the transaction: the petitioner held a long-term (95 year) lease with transferable rights under the lease deed, and the transaction extinguished the petitioner's rights and transferred benefits arising out of immovable property to the assignee. The Court considered and followed the reasoning of the Gujarat High Court which held that assignment/sale/transfer of leasehold rights of industrial plot allotted by a State industrial development corporation constitutes transfer of benefits arising out of immovable property and is not a supply of services for levy under Section 9, and noted the relevance of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 granting nil rate for certain one-time upfront amounts for long-term leases by State industrial development corporations. The Court observed that the essential element of supply - being in the course or furtherance of the petitioner's business - was absent because the transaction related exclusively to transfer of immovable property benefits and had no nexus with the petitioner's business operations. The Court rejected classification of the assignment as 'other miscellaneous services' under the rate notification.Conclusion: The assignment/transfer of the petitioner's leasehold rights is a transfer of benefits arising out of immovable property and does not constitute a supply of services attracting GST; the impugned order dated 30/12/2025 is quashed and set aside, and the writ petition is allowed in favour of the assessee.