Supreme Court Validates Bombay HC Stance: Assignment of Leasehold Rights in MIDC Plots Excluded from GST Ambit

The taxation of real estate transactions, particularly those involving the transfer of leasehold rights, has historically been a highly litigated domain under the indirect tax regime. A major point of friction between the revenue authorities and the assessee has been whether the absolute assignment of a long-term lease constitutes a taxable supply of services.

Providing substantial relief to the industrial sector, the apex court has recently dismissed the revenue's appeal in the landmark case of Assistant Commissioner (Anti Evasion) & Anr. Vs Aerocom Cushions Private Limited. By refusing to interfere with the Bombay High Court's ruling, the Supreme Court has cemented the legal position that the assignment of leasehold rights in an industrial plot does not attract levies under the Central Goods and Services Tax Act, 2017.

The controversy ignited when the anti-evasion wing of the GST department targeted an assessee who had transferred their leasehold rights in a Maharashtra Industrial Development Corporation (MIDC) plot to another business entity.

Illustrative Scenario: To understand the context, consider an assessee who holds a 95-year lease on an industrial land parcel. The assessee decides to exit the location and assigns the remaining lease period to a new company for a premium consideration of Rs. 2.5 crore, after paying the requisite transfer charges to the nodal authority. Subsequently, the GST department issues a demand notice for Rs. 45 lakh, treating this assignment as a taxable service.