Leasehold rights and land development reimbursements were held taxable as supplies of service under GST

Assignment of leasehold rights in industrial land was treated as a taxable supply of service because the transfer covered only the right to use the premises for the balance lease term and did not transfer title in land; GST was held payable on the consideration received. Recovery of land development costs was also held taxable because the development works, including roads, drainage, levelling and compound wall, were identifiable services that enhanced the premises, and the reimbursement was separately ascertainable as consideration for those services. The appellate challenge failed, and the advance ruling was sustained in full.

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Issues: (i) Whether assignment of leasehold rights in industrial land constitutes a taxable supply of service under the goods and services tax law. (ii) Whether recovery of land development costs is a taxable supply of service under the goods and services tax law.

Issue (i): Whether assignment of leasehold rights in industrial land constitutes a taxable supply of service under the goods and services tax law.

Analysis: The transfer involved only the right to use the demised premises for the balance lease term and did not amount to transfer of title in land. Section 7 read with Paragraph 2(a) of Schedule II treats the grant of a right to use immovable property for consideration as a supply of service. The cited High Court view was not treated as final because the matter was pending before the Supreme Court, and the circular and other advance rulings supported the same interpretation.

Conclusion: The assignment of leasehold rights is a taxable supply of service and GST is payable on the consideration received.

Issue (ii): Whether recovery of land development costs is a taxable supply of service under the goods and services tax law.

Analysis: The land development activities included internal roads, drainage, levelling, compound wall and allied infrastructure. These works constituted identifiable development and construction services that enhanced the utility of the premises. The reimbursement was separately ascertainable from the lease consideration and therefore represented consideration for services rendered.

Conclusion: Recovery of land development costs is taxable as a supply of service and attracts GST.

Final Conclusion: The appellate challenge failed and the advance ruling was sustained in full, leaving the taxability findings against the appellant undisturbed.

Ratio Decidendi: Assignment of leasehold rights without transfer of title is a taxable supply of service, and separately identifiable reimbursement for land development works is also taxable where it represents consideration for services rendered.

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