Bombay High Court granted interim stay on adjudication order involving levy of GST on transfer of leasehold rights
The Bombay High Court has issued an interim stay on an adjudication order concerning the levy of Goods and Services Tax (GST) on the transfer of leasehold rights. This decision came in the case of Tokheim India (P.) Ltd. v. Union of India [Writ Petition No. 4487 of 2025 dated April 03, 2025], where the petitioner challenged an order confirming GST liability on the assignment of leasehold rights and buildings. The petitioner argued that such a transaction constitutes a dealing in immovable property and thus falls outside the ambit of GST. The High Court noted that similar issues are under consideration in other cases, with adjudications of comparable show cause notices having been stayed. Citing precedents, including a Gujarat High Court ruling that held such assignments are transfers of benefits arising from “immovable property” and not subject to GST, the Bombay High Court stayed the impugned order. The matter has been listed for a final hearing alongside connected writ petitions, reinforcing the ongoing legal debate regarding GST applicability on the assignment of leasehold rights.
Facts:
M/s Tokheim India Private Limited (“the Petitioner”) was served a SCN dated August 02, 2024, by the Revenue Department alleging that the GST is leviable on the assignment of leasehold rights of a plot of land and buildings to a third party.
An Order dated January 06, 2025 (“the Impugned Order”) was passed, confirming tax liability considering the transaction as supply of service.
The Petitioner challenged the Impugned Order contending that the assignment of leasehold rights of a plot of land allotted by the Maharashtra Industrial Development Corporation (“the MIDC”), and structures built thereon, constitutes a transaction in immovable property. Hence, GST will not be leviable.
Hence, aggrieved by the Impugned Order, the Petitioner filed the present writ petition.
Issue:
Whether the GST is leviable on the assignment of leasehold rights of industrial plots and buildings by a lessee to a third party?
Held:
The Hon’ble High Court of Bombay in Writ Petition No. 4487 of 2025 held as under:
- Relied on, the Division Bench of the Hon’ble Gujarat High Court in the case of Gujarat Chambers of Commerce and Industry (“GIDC”) and Others v. Union of India [Special Civil Application No. 13322 of 2024 dated January 03, 2025]held that the assignment by sale or transfer of leasehold rights of the plot of land allotted by GIDC to the lessee or its successor (“assignor”) in favour of a 3rd party (“assignee”) for consideration, shall be an assignment/sale/ transfer of benefits arising out of “immovable property” by the lessee-assignor in favour of a 3rd party who would then become a lessee of GIDC in place of the original allottee-lessee. In such circumstances, the Gujarat High Court held that the provisions of Section 7 (1) (a) of the CGST Act providing for scope of supply read with clause 5 (b) of Schedule II and clause 5 of Schedule III would not be applicable to such a transaction and the same would not be subject to levy of GST as provided under Section 9 of the GST Act.
- Relied on, Chambers of Small Industries Association & Another v. The State of Maharashtra & Others [Writ Petition No. 16665 of 2024] as well as on Siemens Ltd. v. Union of India in [Writ Petition No. 14434 of 2023] wherein the Court had stayed adjudication of SCN.
- Held that, the effect and implementation of the Impugned Order shall remain stayed until further orders. The matter was listed along with other connected writ petitions for final hearing.
Our Comments:
Section 7 of the CGST Act prescribes that “Scope of Supply”. Further, Section 7(1)(a) provides that all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.
In the case of Time Technoplast Limited vs. Union of India [Special Civil Application No. 14293 of 2024 dated March 26, 2025] it was held that deed of assignment was a complete transfer of entire leasehold rights in favour of assignee by assessee for valuable consideration, according to the provisions of Section 7(1)(a) of the CGST Act, providing for scope of supply read with clause 5(b) of Schedule II and Clause 5 of Schedule III would not be applicable to such transaction of assignment of leasehold rights of land and building and would not be subject to levy of GST as provided under Section 9 of the CGST Act. Therefore, the Impugned SCN was to be set aside.
In the case of Elite Clothing Company (P.) Ltd. v. Union of India [Writ Petition (L) No. 8827 of 2025 dated April 17, 2025] wherein it was held that the Court had stayed the adjudication of the SCN issued. In the instant writ petition, assessee had challenged the adjudication and rectification Order Considering that in other writ petitions, ad interim relief was to be granted to assessee also by staying the Impugned Orders.
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