The applicant is challenging a GST (Goods and Services Tax) decision made by the authorities, which claimed that they owed GST due to not paying it on the transfer of leasehold rights. The applicant had obtained a long-term lease of a piece of land from the Maharashtra Industrial Development Corporation (MIDC) for 95 years and went on to construct a factory building on that land.
On September 22, 2025, the department issued a Show Cause Notice (SCN) alleging that the assignment of leasehold rights constitutes the supply of services under Section 7 of the GST Act. This is interpreted in conjunction with Clause 2(b) of Schedule II, considering it as leasing or letting out a building for business purposes. The assignment is classified as “other miscellaneous services,” which are taxable at 18% under Entry 35 of Notification No. 11/2017-CT (Rates). As a result, GST has been demanded from the applicant.
The applicant said that the transaction was not a lease or sub-lease; however, a complete assignment of leasehold rights whereby the rights of the applicant stood extinguished, and the assignee stepped into the shoes of the original lessee. Hence, it is directed to transfer the advantages emerging from immovable property and not a supply of service under GST.
The question at hand is whether transferring the rights to use land and buildings for a payment is considered a “service” under the Goods and Services Tax (GST) law. If it is, then it would be subject to GST.
The Court said that the impugned transaction was an assignment of leasehold rights, and neither a lease nor a sub-lease, whereby the rights of the applicant in the property were extinguished and transferred to the assignee. The same transaction is directed to the transfer of benefits emerging from immovable property, which does not come under the ambit of supply under the GST structure.
The department’s attempt has been denied by the Court to categorise the transaction under “other miscellaneous services” taxable at 18%, marking that the same categorisation was not accurate since the entry relates to the petty services like washing, cleaning, dyeing, beauty services, etc., and cannot be extended to the assignment of immovable property rights.
The Court relied on the judgment of the Gujarat High Court in the case of Gujarat Chamber of Commerce and Industry v. Union of India. The judgment stated that the assignment of leasehold rights in industrial plots involves the transfer of benefits derived from immovable property. Therefore, this assignment does not fall under the scope of supply as defined in Section 7 of the GST Act.
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It specified that the required ingredient of supply, like the activity needs to be performed in the course of furtherance of business, was not there, because the transaction only consists of the transfer of property rights.
As per that, the impugned order demanding GST was quashed and set aside, and the writ petition was permitted. The Court stated that the assignment of leasehold rights does not include the supply of services under the GST Act, and hence no GST is to be levied on it.
| Case Title | The Case of M/s. Hindustan Equipment Craft Versus Assistant Commissioner of State Tax |
| Case No. | WRIT PETITION NO. 1257 OF 2026 |
| For Petitioner | Mr. Chandrashekhar |
| For Respondent | Mr. Vijaykumar Paliwal |
| Bombay High Court | Read Order |
