Assignment of Leasehold Rights in Land and Building Is Immovable Property Transfer, Exempt From GST
Issue
Whether GST is leviable under Section 7 of the CGST/GGST Act on the assignment and transfer of leasehold rights in a plot of land and building constructed thereon for a lump-sum consideration.
Facts
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Original Lease: A plot of land was allotted on lease by the State Industrial Development Corporation (GIDC), and a building was subsequently constructed thereon by the lessee/assignor.
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Transaction: The lessee/assignor assigned and transferred its leasehold rights in the plot along with the building to a third-party assignee in exchange for a lump-sum payment.
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Substitution of Lease: Following the assignment, the third-party assignee stepped into the shoes of the original allottee and became the direct lessee of GIDC.
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High Court Ruling: The High Court held that the transaction constituted a transfer of benefits arising out of “immovable property” under the Transfer of Property Act, 1882, and therefore fell outside the scope of “supply” under GST laws.
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Revenue’s Appeal: The Revenue filed a Special Leave Petition (SLP) before the Supreme Court challenging the High Court’s decision.
Decision
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The Supreme Court noted that a similar SLP on identical legal issues had already been dismissed in Assistant Commissioner (Anti Evasion) v. Aerocom Cushions (P.) Ltd. (SC).
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Following the established precedent, the Supreme Court dismissed the Revenue’s Special Leave Petition.
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The High Court’s order holding that GST is not leviable on the assignment of leasehold rights was upheld.
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The issue was decided in favour of the assessee.
Key Takeaways
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Immovable Property Exclusion: The assignment of long-term leasehold rights in land and buildings for lump-sum consideration represents a transfer of benefits arising out of immovable property, which is excluded from the scope of GST “supply.”
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Supreme Court Precedent: The dismissal of the Revenue’s SLP, relying on Aerocom Cushions (P.) Ltd., affirms that assignment of leasehold plots allotted by industrial development corporations does not attract GST liability under Section 7 read with Section 9 of the CGST Act.