Assignment of leasehold rights is not a taxable supply of service under GST when it transfers the leasehold interest itself.

Absolute assignment of leasehold rights in GIDC land was treated as a transfer of the leasehold interest itself, not a mere service of use or enjoyment. Applying the GST scheme on scope of supply, the Court held that such a transfer of benefits arising from immovable property falls outside the taxable supply of services and is not exigible to GST under the State GST law. On that basis, the show-cause proceedings and demand based on the assignment transaction could not stand, and the impugned demand order was set aside.

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Issues: Whether assignment and transfer of leasehold rights in GIDC land for consideration constitutes a supply of service exigible to GST under the State Goods and Services Tax Act, 2017, or whether it is a transfer of immovable property /outside the scope of supply.

Analysis: The dispute was governed by the statutory scheme of scope of supply under Section 7(1)(a), levy under Section 9, and the treatment of immovable property and lease-related transactions under the GST framework. The Court followed its earlier decision holding that a long-term lease granted by GIDC is a supply of service, but an absolute assignment by the lessee in favour of a third-party assignee divests the lessee of all rights and operates as a transfer of benefits arising from immovable property. On that reasoning, such assignment is not merely use or enjoyment of property; it is transfer of the leasehold interest itself, which is treated as immovable property and falls outside the taxable net of supply of services. Consequently, the show-cause proceedings and the resultant demand based on the same transaction could not be sustained.

Conclusion: The transaction of assignment of leasehold rights was held not to be liable to GST under Section 7(1)(a) read with the relevant Schedules, and the impugned demand order was set aside.

Ratio Decidendi: Absolute transfer of leasehold rights in immovable property by the lessee to an assignee is not a supply of service under the GST law and is not exigible to GST.

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