2025 (4) TMI 1376 - HC - GST

Levy of GST - assignment of leasehold rights of a plot of land allotted on lease by the Maharashtra Industrial Development Corporation (MIDC) and the buildings constructed thereon by the lessee to a third party on the payment of a lump-sum consideration - HELD THAT - The Division Bench of the Gujarat High Court in GUJARAT CHAMBER OF COMMERCE AND INDUSTRY ORS. 2025 (1) TMI 516 - GUJARAT HIGH COURT has taken a view that the assignment by sale or transfer of leasehold rights of the plot of land allotted by the Gujarat Industrial Development Corporation (GIDC) to the lessee or its successor (assignor) in favour of the third party (assignee) for consideration shall be an assignment/sale/transfer of benefits arising out of immovable property by the lessee-assignor in favour of a third party (assignee) who would then become a lessee of GIDC in place of the original allottee-lessee. In such circumstances the Gujarat High Court held that the provisions of Section 7 (1) (a) of the CGST 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 a transaction and the same would not be subject to levy of CGST as provided under Section 9 of the CGST Act. In the facts of the present case what is challenged by the Petitioner is the Show Cause Notice issued to the Petitioner dated 7th January 2025. Petition disposed off.

Summary

The Bombay High Court addressed whether Goods and Services Tax (GST) applies to the assignment of leasehold rights of MIDC-allotted land and buildings constructed thereon, transferred to a third party for lump-sum consideration. The GST authorities treated this as a "supply of service" under the CGST Act, 2017. The petitioner relied on the Gujarat High Court's Division Bench ruling in Gujarat Chambers of Commerce and Industry v. Union of India, which held that such assignment constitutes a "sale/transfer of benefits arising out of immovable property" and is not subject to GST under Section 7(1)(a) read with Schedule II Clause 5(b) and Schedule III Clause 5, thus not leviable under Section 9 CGST Act.Noting no contrary precedent, the Bombay High Court recognized the significance of this issue and referenced similar petitions, including Siemens Limited v. Union of India, where adjudication on show cause notices was stayed. The Court granted ad-interim relief restraining respondents from proceeding with the impugned Show Cause Notice dated 7 January 2025, pending final disposal. The matter was directed to be heard along with connected petitions on 28 April 2025.