Tokheim India Pvt. Ltd. Vs Union of India (Bombay High Court)
Bombay High Court has issued a stay on the levy of Goods and Services Tax (GST) on the assignment of leasehold rights for plots allotted by the Maharashtra Industrial Development Corporation (MIDC), including buildings constructed on them, when transferred by a lessee to a third party for a lump sum consideration. The decision comes amidst ongoing legal debates regarding the classification of such transactions under GST law.
The core issue before the court is whether the assignment of leasehold rights constitutes a ‘supply of service’ under the Central/State Goods and Services Act, 2017, and is therefore subject to GST. Tokheim India Pvt. Ltd., the petitioner, argued that their case is squarely covered by a recent judgment from the Gujarat High Court.
The Gujarat High Court, in Gujarat Chambers of Commerce and Industry and Others Vs. Union of India and Others, decided on January 3, 2025, held that the assignment or transfer of leasehold rights of land allotted by the Gujarat Industrial Development Corporation (GIDC) to a third party for consideration is essentially a transfer of “benefits arising out of immovable property.” The Gujarat High Court concluded that such transactions would not fall under the ‘scope of supply’ provisions of Section 7(1)(a) of the GST Act, read with Schedule II (clause 5(b)) and Schedule III (clause 5), and thus would not be subject to GST levy under Section 9.
