TaxTMI 
TaxTMI 
2026 (2) TMI 891
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....to show cause as to why goods and services tax amounting to Rs. 59,40,000/- along with interest of Rs. 40,98,600/- should not be demanded and recovered from the petitioner under sub-section (1) of Section 74 of the Central Goods and Services Tax Act, 2017 (for short, "Act of 2017") towards non payment of GST on transfer of leasehold rights. 4. The notice has been issued under Section 74(1) of Act of 2017 on the ground that the petitioner has concealed a transaction where he has assigned his leasehold rights in the plot belonging to MIDC to Shri Rao Himanshu S/o Yashpal Arya for Rs. 3,30,00,000/-. As such, it is undisputed that the leasehold rights have been assigned with consent of MIDC Hingna, Nagpur and that the petitioner has paid an amount of Rs. 10,40,600/- by way of additional premium. 5. According to the respondents, this transfer of assignment of rights would amount to supply of services in terms of Section 7(1) of the Act of 2017 read with sub-clause (b) of Clause 2 of Schedule II. For the purpose of ready reference, we reproduce relevant parts of Section 7 and Clause 2(b) of Schedule II. "7. Scope of supply- (1) For the purposes of this Act, the ex....
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....es, in our view, cannot be extended to assignment of leasehold rights in an immovable property, to term it to be other miscellaneous services as classified under clause at Sr. No.35 of the Notification. 9. In that view of the matter, the notice could be said to be bad in law on this count alone. We, however, find it necessary to consider whether the assignment of leasehold rights would amount to supply of service. Admittedly, the petitioner holds a lease for 95 years. Thus it is a long term lease and in that sense is a leasehold ownership property. The rights under the lease are transferable in terms of clause 2(u) of the lease executed between MIDC and the petitioner. Thus the rights are transferable. Accordingly, the petitioner has transferred the rights to Shri Rao Himanshu S/o Yashpal Arya with prior consent of MIDC. 10. This transaction on the face of record constitute transfer of immovable property by the petitioner to Shri Rao Himanshu S/o Yashpal Arya. The transaction pertains exclusively to transfer of benefits arising out of an immovable property and has no nexus whatsoever with the business of the petitioner company. Consequently, the essential element of supply of....
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....ervices. As per clause 5(a) of Schedule II renting of immovable property is to be treated as supply of services. Therefore, allotment of land which is undisputedly an immovable property on lease would be covered by clause 5(a) of the Schedule II of the GST Act and therefore, the same would be covered by the scope of supply of services liable to levy of tax under the provisions of section 9 of the GST Act. 35. However, by Notification no. 12/2017-Central Tax (Rate) dated 28.06.2017 issued in exercise of powers conferred by sub-section (1) of section 11 of the GST Act, on recommendations of the GST Council, levy of tax under sub-section (1) of section 9 of the GST Act on intra-State supply of services mentioned therein has been exempted. At Serial No. 41 of the said notification, under Chapter Heading 9972, Nil rate is prescribed for one time upfront amount (called as premium, salami, cost, price, development charges or by any other name) leviable in respect of the service, by way of granting long term (30 years, or more) lease of industrial plots, provided by the State Government Industrial Development Corporations or Undertakings to industrial units. 36. Therefore....
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....e Gujarat High Court thereafter considered various provisions of the General Clauses Act, 1987, Transfer of Property Act, 1882 and the Registration Act, 1908 and other such provisions and rendered the following conclusion : "83. In view of foregoing reasons, assignment by sale and transfer of leasehold rights of the plot of land allotted by GIDC to the lessee in favour of third party-assignee for a consideration shall be assignment/sale/transfer of benefits arising out of "immovable property" by the lessee-assignor in favour of third party-assignee who would become lessee of GIDC in place of original allottee-lessee. In such circumstances, provisions of section 7(1)(a) of the GST Act providing for scope of supply read with clause 5(b) of Schedule II and Clause 5 of Schedule III would not be applicable to such transaction of assignment of leasehold rights of land and building and same would not be subject to levy of GST as provided under section 9 of the GST Act." 13. Thus, the Gujarat High Court held that assignment by sale and transfer of leasehold rights of the plot of land allotted by GIDC to the lessee in favour of third party-assignee for a consideration shall be a....