The Bombay High Court ruled that the assignment of long-term leasehold rights in land within the Maharashtra Industrial Development Corporation (MIDC) does not constitute a supply of service and is thus not subject to Goods and Services Tax (GST). This decision came in the case involving M/s Vidarbha Beverages, a Nagpur-based partnership firm, which had assigned its 95-year leasehold rights in an MIDC industrial plot to a third party for ₹3.30 crore. The firm had obtained prior consent from MIDC and paid an additional premium for the assignment.
The State Tax Officer issued a Show Cause Notice under Section 74 of the CGST Act, demanding GST of ₹59.40 lakh plus interest, alleging that the transaction was a taxable service. The petitioners contested this notice, arguing that the transaction was a transfer of immovable property benefits, not a service.
The Court concluded that the assignment was neither a lease nor a sub-lease, as the assignor’s rights were completely extinguished. It determined that the transaction was a transfer of benefits from immovable property, which is not considered a “supply” under Section 7 of the CGST Act. Additionally, the transaction was not conducted in the course or furtherance of business, a necessary condition for GST imposition. Citing a Gujarat High Court ruling as precedent, the Bombay High Court quashed the Show Cause Notice and adjudication order, confirming that GST was not applicable.
Order Date - 13 February 2026
Parties : M/s. Vidarbha Beverages, Smt. Archana Wd/o Hasmukh Panchamatia Partner M/s. Vidarbha Beverages, Shri. Rasesh S/o Panchamatia Partner M/s. Vidarbha Beverages and Shri. Vishal S/o Hasmukh Panchamatia, Partner M/s. Vidarbha Beverages Vs Union of India, State of Maharashtra, Through the Secretary and The State Tax Office
Facts -
- M/s Vidarbha Beverages, a partnership firm in Nagpur, held 95-year leasehold rights in an MIDC industrial plot where it had constructed a factory building.
- With prior consent of MIDC, the firm assigned its leasehold rights to a third party for ₹3.30 crore, paying additional premium to MIDC.
- The State Tax Officer issued a Show Cause Notice under Section 74, alleging suppression and demanding GST of ₹59.40 lakh plus interest, treating the transaction as a taxable service.
- Aggrieved by the notice and subsequent adjudication order, the petitioners approached the High Court.
Issue -
- Whether assignment of leasehold rights in land and building amounts to a “supply of services” under GST law, attracting tax under Section 74?
Order -
- The Court held that assignment of leasehold rights is neither a lease nor a sub-lease, as the assignor’s rights stand fully extinguished.
- Such a transaction is a transfer of benefits arising from immovable property, which falls outside the scope of “supply” under Section 7 of the CGST Act.
- The transaction was not in the course or furtherance of business, an essential requirement for levy of GST.
- Relying on the Gujarat High Court ruling and treating it as binding, the Court quashed the SCN and adjudication order, holding that GST was not payable.
