Assignment of Leasehold Rights in Industrial Plot Not Liable to GST- Bombay High Court Rules
Date and Year of Judgment
27 February 2026
The Bombay High Court held that transfer or assignment of leasehold rights in an industrial plot amounts to transfer of benefits arising out of immovable property and therefore falls outside the scope of GST.
Case Citation
M/s Hindustan Equipment Craft v. Assistant Commissioner of State Tax & Anr.
Writ Petition No. 1257 of 2026
Neutral Citation: 2026:BHC-NAG:3455-DB
High Court of Judicature at BombayNagpur Bench
Bench:Justice Anil L. PansareJustice Nivedita P. Mehta
Other cases
Gujarat Chamber Of Commerce And Industry & Ors., M/s. Multi Thread Fastners, M/s. Imperial Engineers, Lucid Colloids Ltd., M/s. Metal Plast Engineers Versus Union Of India & Ors., Chief Commissioner of Central Tax, State of Gujarat, Special Commissioner of State Tax, State Tax Officer (1), Assistant Commissioner of State Tax (2), State Tax Officer (EOW).
No.- R/SPECIAL CIVIL APPLICATION NO. 11345 of 2023 With R/SPECIAL CIVIL APPLICATION NO. 1278, 3736, 4638, 4224, 7108, 9364, 9845, 9868, 10186, 10924 of 2024 With R/SPECIAL CIVIL APPLICATION NO. 12345 of 2024
Gujarat High Court
The Court relied heavily on the Gujarat High Court judgment in Gujarat Chamber of Commerce and Industry, reinforcing an emerging judicial consensus on this issue.
1. Main Issue Involved
Whether assignment of leasehold rights in an industrial plot allotted by MIDC to a third party for considerationconstitutes “supply of service” under Section 7 read with Schedule II of the CGST/MGST Act, thereby attracting GST.
The case addresses an important question frequently arising in industrial estate transactions—whether transfer of leasehold rights in land constitutes taxable supply under GST.
2. Sections and Rules Discussed
Section 7 – Scope of supply
Section 73(5) – Demand for tax not paid
Schedule II – Activities treated as supply of services
Notification No. 11/2017-CT (Rate)
Notification No. 12/2017-CT (Rate)
The dispute centered on whether assignment of leasehold rights could be treated as supply of services under Schedule II of the GST Act.
3. Facts of the Case
The petitioner M/s Hindustan Equipment Craft held a 95-year lease of an industrial plot allotted by MIDC at Hingna, Nagpur. The petitioner constructed a factory building on the said plot.
Subsequently, the petitioner assigned the leasehold rights in the plot along with the building to M/s Kothari Belting Company for consideration of ₹1.15 crores, with the consent of MIDC. The petitioner also paid additional premium of ₹2,33,500 to MIDC for the transfer permission.
The GST department issued a show cause notice dated 22.09.2025 under Section 73, alleging that the assignment of leasehold rights amounted to supply of services under Section 7 read with Schedule II, taxable at 18% GST.
An adjudication order dated 30.12.2025 confirmed the demand.
Aggrieved, the petitioner filed the writ petition before the High Court.
The department attempted to classify assignment of leasehold rights as “miscellaneous services” taxable under Notification 11/2017.
4. Petitioner’s Submissions
The petitioner argued that:
Assignment of leasehold rights is transfer of benefits arising out of immovable property.
Such transfer cannot be classified as supply of services under Section 7 of the GST Act.
The transaction extinguished the petitioner’s rights and therefore cannot be treated as lease or sub-lease.
Reliance was placed on the Gujarat High Court judgment in Gujarat Chamber of Commerce and Industry v. Union of India (2025).
The petitioner’s core argument was that leasehold rights constitute an interest in immovable property and its transfer is akin to sale of such rights.
5. Department’s Submissions
The department contended that:
Assignment of leasehold rights amounts to transfer of rights in property.
Such transfer falls within the scope of supply under Section 7.
It should therefore be treated as supply of services taxable under GST at 18% under Notification 11/2017.
The department attempted to classify the transaction under “other miscellaneous services” under GST rate notification.
6. Analysis and Findings of the Court
The Court examined the scope of Section 7 of the GST Act and the entries in Schedule II relating to supply of services.
The Court observed that Schedule II treats lease or letting of land or building as supply of services, but the present transaction was not a lease or sub-lease.
In the case at hand, the petitioner assigned the leasehold rights entirely to the assignee, thereby extinguishing its own rights.
Thus, the transaction effectively constituted transfer of benefits arising out of immovable property, rather than supply of service.
The Court also referred to the judgment of the Gujarat High Court in Gujarat Chamber of Commerce and Industry v. Union of India (2025), where a similar issue relating to assignment of leasehold rights in industrial plots allotted by GIDC was considered.
The Gujarat High Court held that such assignment amounts to transfer of benefits arising out of immovable property and does not fall within the scope of supply under GST.
The Bombay High Court agreed with this reasoning.
The Court emphasized that GST cannot be levied on transactions that essentially constitute transfer of immovable property rights.
Important Observations of the Court
Assignment of Leasehold Rights Is Transfer of Immovable Property Rights
The Court observed:
“This transaction, on the face of record, constitute transfer of immovable property by the petitioner to M/s Kothari Belting Company. The transaction pertains exclusively to transfer of benefits arising out of an immovable property.” (Para 10)
Transaction Not in Course or Furtherance of Business
The Court further held:
“The transaction pertains exclusively to transfer of benefits arising out of an immovable property and has no nexus whatsoever with the business of the petitioner company. Consequently, the essential element of supply of service in the course of business or in furtherance of business is completely absent.” (Para 10)
Reliance on Gujarat High Court Judgment
Referring to the Gujarat High Court decision, the Court reproduced the finding:
“Assignment by sale and transfer of leasehold rights… shall be assignment/sale/transfer of benefits arising out of immovable property… and would not be subject to levy of GST.” (Para 12-13)
Decision of Other High Court Binding on Authorities
The Court further observed:
“Until a contrary decision is given by any other competent High Court… the authorities have to proceed on the footing that the law declared by the High Court though of another State is the final law.” (Para 14)
The Court also clarified the binding effect of High Court judgments from other states on subordinate authorities.
7. Judgment of the Court
The High Court held that:
Assignment of leasehold rights constitutes transfer of benefits arising from immovable property.
Such transaction does not amount to supply under Section 7 of the GST Act.
Therefore GST cannot be levied on such assignment.
Accordingly:
The adjudication order dated 30.12.2025 was quashed and set aside.
The writ petition was allowed.
The Court categorically ruled that GST is not leviable on assignment of leasehold rights in industrial plots.
8. Similar / Related Judgments
Gujarat Chamber of Commerce & Industry v. Union of India (2025) – Gujarat High Court
Various rulings under Service Tax regime treating leasehold rights as immovable property interest
This judgment strengthens the growing judicial view that transfer of leasehold rights is essentially a transaction in immovable property.
9. CA BTA Insights
This is a very significant judgment for industrial estate transactions involving MIDC, GIDC and similar development authorities.
Key Principles Emerging
Assignment of leasehold rights amounts to transfer of immovable property benefits.
Such transaction does not constitute supply of services under GST.
Essential requirement of “course or furtherance of business” under Section 7 is absent.
GST cannot be imposed merely by classifying the transaction under miscellaneous services.
Practical Implications
This ruling will be highly relevant for:
MIDC / GIDC plot transfers
Industrial estate land assignments
Factory land transfer through leasehold rights
Taxpayers facing GST demand on such transfers can rely on this judgment along with Gujarat Chamber of Commerce case.
The judgment strengthens the argument that GST cannot be imposed on transactions involving transfer of interest in immovable property.