High Court Quashes GST Demand on Assignment of Long-Term Leasehold Rights:

High Court Quashes GST Demand on Assignment of Long-Term Leasehold Rights M/s Vidarbha Beverages, a partnership firm, along with its partners, challenged a show cause notice dated 18.06.2025 issued by the State Tax Officer, Nagpur, under Section 74(1) of the CGST Act, 2017. The notice alleged suppression and proposed recovery of GST amounting to Rs. 59,40,000 along with interest of Rs. 40,98,600 on the ground that the petitioners had assigned their leasehold rights in an MIDC plot to a third party for consideration of Rs. 3.30 crore. The authorities treated the transaction as a taxable supply of services under Section 7 of the Act read with Schedule II, and classified it as “other miscellaneous services” taxable at 18%. The petitioners contended that the transaction was not a lease or sub-lease but an outright assignment of long-term leasehold rights with MIDC’s consent, resulting in extinguishment of their rights. Central Issue: Whether assignment of long-term leasehold rights in industrial land, with transfer of building and possession, amounts to “supply of services” under Section 7 of the CGST Act read with Schedule II, thereby attracting GST. HC Decision: The High Court held that the impugned transaction was not a lease or sub-lease but an assignment resulting in complete extinguishment of the petitioner’s rights. The Court observed that such transfer constitutes assignment/sale of benefits arising out of immovable property and has no nexus with the petitioner’s business so as to qualify as supply in the course or furtherance of business. Relying on Gujarat Chamber of Commerce and Industry v. Union of India, the Court concurred that assignment of leasehold rights in industrial land amounts to transfer of immovable property and does not fall within the scope of taxable supply under the GST Act. It further held that the attempt to classify the transaction under “other miscellaneous services” was misconceived. The show cause notice and the adjudication order were accordingly quashed and set aside. To Read Full Judgment, Download PDF Given Below