Bombay HC Quashes GST Demand as Assignment of Leasehold Rights Is Transfer of Immovable Property

Vidarbha Beverages Vs Union of India (Bombay High Court)

In Vidarbha Beverages Vs Vishal S/o Hasmukh Panchamatia, the Bombay High Court examined a writ petition challenging a show cause notice dated 18 June 2025 issued by the tax authorities demanding Goods and Services Tax (GST) of ₹59,40,000 along with interest of ₹40,98,600 under Section 74(1) of the Central Goods and Services Tax Act, 2017. The demand related to alleged non-payment of GST on the transfer of leasehold rights in a plot belonging to MIDC, which the petitioner had assigned to a third party for ₹3,30,00,000. The transfer had been executed with the consent of MIDC, and the petitioner had paid ₹10,40,600 as additional premium.

According to the respondents, the assignment of leasehold rights amounted to a supply of services under Section 7(1) of the GST Act read with Clause 2(b) of Schedule II, which treats certain leasing and letting activities as supply of services. The authorities also considered the transaction to be a service classifiable under “other miscellaneous services” taxable at 18% under Notification No. 11/2017-Central Tax (Rate) dated 28 June 2017.

The Court observed that the transaction in question was an assignment of leasehold rights rather than a lease or sub-lease. The show cause notice itself acknowledged that the transaction did not amount to a sub-lease because the petitioner’s rights were extinguished after the transfer. The Court noted that classifying such a transaction under “other miscellaneous services” was not appropriate, as that category primarily includes services such as washing, cleaning, dyeing, beauty, and physical well-being services, which could not reasonably be extended to assignment of leasehold rights in immovable property.