17/01/2026
๐จ GST NOT APPLICABLE on Transfer of Leasehold Rights (MIDC / GIDC etc.) โ Bombay HC Ruling ๐จ
The Bombay High Court (Nagpur Bench) in Aerocom Cushions Pvt. Ltd. v. AC (CGST) (9 Jan 2026) has held that assignment of leasehold rights is NOT liable to GST.
๐ Key Takeaways:
โ
Assignment โ Lease / Renting
Once leasehold rights are assigned, the original lesseeโs rights are extinguished. It is not leasing or sub-leasing under Schedule II.
โ
Transfer of Immovable Property
Long-term leasehold rights (e.g. 95 years) amount to ownership-like rights. Their transfer is a transfer of immovable property, not a service.
โ
No โSupplyโ under Section 7
If the transaction is not in the course or furtherance of business, it fails the basic requirement of โsupplyโ under GST.
โ
Cannot be taxed as โOther Miscellaneous Servicesโ
Such classification is artificial and invalid. This category is meant for minor services, not property transactions.
โ
Schedule II cannot override Section 7
Schedule II only classifies activities; it cannot create taxability where Section 7 does not apply.
โ
Assignment โ Renting
Renting involves retention of rights and recurring consideration. Assignment is a permanent transfer for lump-sum consideration.
โ
Reliance on Gujarat HC upheld
Following Gujarat Chamber of Commerce & Industry v. UOI (2025) โ assignment of leasehold rights is outside GST.
โ
High Court rulings binding nationwide
As per Godavari Devi Saraf (SC), unless a contrary ruling exists, such judgments bind tax authorities across India.
๐ GST still applies ONLY to:
โข Lease premium charged by development authorities (subject to exemptions)
โข Transfer / permission fees charged by authorities (taxable service)
๐งพ Conclusion:
๐ Assignment of leasehold rights in industrial land/building is NOT a taxable supply under GST
๐ Section 74 SCNs on such transactions are invalid
โ ๏ธ Issue may continue until settled by the Supreme Court, but this judgment is a major relief for MSMEs.
