Supreme Court dismisses SLP, affirming that transferring long-term leasehold land rights does not attract GST.
Issue
Whether the assignment and transfer of long-term leasehold rights in an industrial plot (allotted by MIDC) to a third party constitutes a taxable “supply of service in the course or furtherance of business” under Section 7 of the Central Goods and Services Tax Act, 2017.
Facts
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The Transaction: The petitioner held a 95-year lease on an industrial plot belonging to the Maharashtra Industrial Development Corporation (MIDC) and subsequently assigned/transferred these leasehold rights to an entity named ‘S’ with MIDC’s formal consent.
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The Tax Notice: The tax authorities issued a show-cause notice to the petitioner under Section 74(1), alleging that the petitioner had concealed this transaction and asserting that the assignment of leasehold rights amounted to a taxable supply of service under Section 7(1).
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High Court Challenge: The assessee challenged the validity of this notice through a writ petition before the High Court.
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High Court Finding: The High Court found that the transaction on the face of the record constituted a transfer of benefits arising out of immovable property rather than a business service. The transaction had no nexus with the core business operations of the petitioner company.
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Precedent Relied Upon: The High Court relied on the judgment in Gujarat Chamber of Commerce and Industry v. UOI [2025], which explicitly established that the sale and transfer of allotted leasehold plot rights is a transfer of benefits from immovable property and is outside the scope of GST.
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Supreme Court Appeal: Aggrieved by the High Court’s ruling in favor of the assessee, the revenue department filed a Special Leave Petition (SLP) before the Supreme Court.
Decision
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SLP Dismissed: The Supreme Court declined to interfere with the detailed judgment passed by the High Court and summarily dismissed the revenue’s Special Leave Petition.
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Exclusion from Supply Confirmed: The Apex Court upheld the position that the essential statutory element of a “supply of service in the course or furtherance of business” was entirely absent in this land-transfer transaction.
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No GST on Immovable Benefits: By dismissing the SLP, the Court affirmed that the assignment or sale of long-term leasehold land rights represents a transfer of benefits arising out of immovable property, rendering it exempt from the levy of GST.
Key Takeaways
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Leasehold Transfers Escape GST: The permanent assignment or transfer of long-term leasehold rights (such as 95-year industrial leases) is legally treated on par with the sale of land/immovable property, which falls outside the ambit of GST under Schedule III of the Act.
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Business Furtherance Test is Vital: For any transaction to be trapped within the net of GST under Section 7, it must be robustly established that the activity was undertaken in the active course or furtherance of the entity’s regular commercial business.
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Benefits of Immovable Property: Financial consideration received for merely transferring an underlying interest or benefit in an immovable asset does not automatically mutate the transaction into a taxable commercial service.