Bombay HC Stays GST Demand on Assignment of Long-Term Leasehold Rights in Land

B. Sorabji Vs Union of India & Ors. (Bombay High Court)

Bombay High Court has temporarily halted a Goods and Services Tax (GST) demand related to the assignment of long-term leasehold rights in land and the structures built upon it. The core issue in B. Sorabji vs. Union of India & Ors. centers on whether such a transaction, involving a lump sum consideration, constitutes a “supply of service” under the Central/State Goods and Services Act, 2017, and is therefore subject to GST. The petitioner argued that this matter is already addressed by a Gujarat High Court decision.

The Gujarat High Court, in the case of Gujarat Chambers of Commerce and Industry and Others Vs. Union of India and Others, ruled that the assignment or transfer of leasehold rights in land, particularly those allotted by industrial development corporations, should be considered as a transfer of benefits arising from “immovable property.” Consequently, the Gujarat High Court held that provisions of Section 7(1)(a) read with Schedule II and Schedule III of the GST Act would not apply to such transactions, exempting them from GST levy under Section 9. Given this precedent and the absence of a conflicting view, the Bombay High Court acknowledged the significance of the issue, noting its presence in other pending petitions like Siemens Limited V/S Union of India & Others.