TaxTMI 
TaxTMI 
Assignment of Leasehold Rights in Industrial Plots under the CGST Act: Distinguishing Lease Services from Transfer of Immovable Property
X X X X Extracts X X X X
X X X X Extracts X X X X
....the industrial development corporation's original grant of a lease, which is treated as a supply of services, and the lessee's subsequent outright assignment that divests the assignor of its entire leasehold estate in favour of the assignee. • 2025 (1) TMI 516 - GUJARAT HIGH COURT held that the consideration received by the assignor for such assignment is outside GST. Consequently, the impugned demands and proceedings were set aside. • The subsequent dismissal of the Revenue's special leave petitions is procedurally significant. However, a dismissal of a special leave petition, without a substantive examination of the legal issue in the order itself, should not be treated as an independent and reasoned ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lease or disposal" made for consideration "in the course or furtherance of business." Section 7(1A) provides that activities which constitute supply under section 7(1) are to be treated as supply of goods or services in accordance with Schedule II. At the same time, section 7(2) gives overriding effect to Schedule III: the activities and transactions specified there "shall be treated neither as a supply of goods nor a supply of services." Schedule III, paragraph 5, covers "sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building." The charge under section 9(1) applies only to intra-State supplies of goods or services or both. Statutory treatment of leasing and renting Schedule II differentiates betwee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ease of thirty years or more of industrial plots by State industrial development corporations or undertakings to industrial units. The operative entry covers amounts described as "premium, salami, cost, price, development charges or by any other name." This entry concerns the original grant of a qualifying industrial lease by the specified public body. It does not, by its own terms, extend to a later assignment by a private lessee. The Court nevertheless held that the taxability of the later assignment must first be tested under the charging and scope provisions; an exemption provision cannot itself determine whether a transaction is otherwise a taxable supply. Detailed Analysis The legal nature of the original lease and the later ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....;s interest. The relevant distinction is not between tangible land and intangible rights in a narrow sense. Rather, it is whether the right transferred is an interest inseparably connected with land and treated by law as an interest in immovable property. On the facts considered, the leasehold rights were held to be such benefits arising from land. The transfer therefore partook the character of a transfer of immovable property. The Court further noted that the assignment was effected through a deed attracting stamp duty and registration requirements. These features supported, though did not independently dictate, the conclusion that the transaction conveyed a proprietary interest in immovable property rather than a service rendered b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he entire land and building, together with the leasehold interest, were transferred to the assignee. This reinforced its conclusion that the transaction was not the provision of a service by the assignor. The outcome should therefore be applied with attention to the actual deed, the original lease covenants, the extent of rights transferred, the retention or absence of any reversionary interest in the assignor, and the treatment of structures and appurtenances. A document described as an assignment may require a different analysis if, in substance, it creates a sub-lease, reserves rights to the transferor, or is structured as continuing rental or licence arrangements. Subsequent judicial developments in the supplied material A late....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re transferred with the leasehold estate, the documentation should identify the composite proprietary transfer accurately. • Transfer charges collected by the industrial development corporation for granting approval are distinct from the consideration paid by the assignee to the outgoing lessee. The ruling recognises that the corporation's approval service may attract GST, while the consideration for the lessee's outright assignment was held outside GST on the facts before the Court. • Tax positions should not be founded merely on the classification applicable to the original lease or on the industrial-lease exemption. The character of the subsequent assignment remains the central inquiry. • Wh....