The Bombay High Court recently ruled in the case of Aerocom Cushions Private Limited v. Assistant Commissioner (Anti-Evasion) & Ors. that the assignment of long-term leasehold rights in industrial land is not subject to Goods and Services Tax (GST). The petitioner had assigned its leasehold rights in a plot allotted by the Maharashtra Industrial Development Corporation (MIDC) to a third party, with the necessary approvals. However, the tax department issued a show cause notice under Section 74 of the GST Act, alleging that the assignment was a taxable supply of services, categorized as "other miscellaneous services" with an 18% tax rate.
The petitioner contested this notice, asserting that the assignment should be considered a transfer of immovable property, not a supply of services. The core issue was whether such an assignment constitutes a taxable service under GST law. The High Court concluded that the assignment of leasehold rights is indeed a transfer of benefits arising from immovable property and does not meet the criteria of "supply in the course or furtherance of business." The Court referenced a similar ruling by the Gujarat High Court in Gujarat Chamber of Commerce and Industry v. Union of India, reinforcing its stance.
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Consequently, the Court deemed the classification of the assignment as "miscellaneous services" legally unsustainable and quashed the show cause notice issued under Section 74 entirely, marking a significant decision on the taxability of leasehold rights under GST.
Parties: Aerocom Cushions Private Limited v. Assistant Commissioner (Anti-Evasion) & Ors.
Order Date: 09 January 2026
Facts –
- The petitioner assigned its long-term leasehold rights in an industrial plot allotted by MIDC to a third party with prior approval.
- The department issued a show cause notice under Section 74 alleging GST liability on the assignment, treating it as supply of services.
- The notice classified the transaction as “other miscellaneous services” taxable at 18%.
- The petitioner challenged the notice contending that assignment of leasehold rights amounts to transfer of immovable property.
Issue –
- Whether assignment of long-term leasehold rights in industrial land constitutes a taxable supply of service under the GST law?
Order –
- The High Court held that assignment of long-term leasehold rights constitutes transfer of benefits arising out of immovable property.
- It ruled that such transaction lacks the essential element of “supply in the course or furtherance of business.”
- The Court relied on the Gujarat High Court ruling in Gujarat Chamber of Commerce and Industry v. Union of India and affirmed its applicability.
- It held that classification of such assignment as “miscellaneous services” is legally unsustainable.
- The show cause notice issued under Section 74 was quashed in entirety.
