The Supreme Court is set to examine whether the assignment of leasehold rights constitutes a “transfer of land” or amounts to a “supply of service” under the Goods and Services Tax (GST) regime.A bench of Justice Pankaj Mithal and Justice Prasanna B. Varale was dealing with Centre's plea challenging a Gujarat High Court judgment that held that assignment of leasehold rights in land...
The Supreme Court is set to examine whether the assignment of leasehold rights constitutes a “transfer of land” or amounts to a “supply of service” under the Goods and Services Tax (GST) regime.
A bench of Justice Pankaj Mithal and Justice Prasanna B. Varale was dealing with Centre's plea challenging a Gujarat High Court judgment that held that assignment of leasehold rights in land and building does not amount to a taxable supply under the GST Act.
Before the High Court, M/s Life Sciences Chemicals, a sole proprietorship, had challenged a GST demand order of over Rs. 8.5 lakhs under Section 74 of the Central and Gujarat Goods and Services Tax Acts, 2017, in connection with the transfer by erstwhile partnership firm with the same trade name 'M/s Life Sciences Chemicals' of leasehold rights over a plot at the GIDC Industrial Estate, Panoli, Ankleshwar.
M/s Life Science Chemicals contended that the transaction was, in substance, a sale of land and therefore excluded from GST under Entry No. 5 of Schedule III to the CGST Act. It was further argued that the transfer of leasehold rights from the erstwhile partnership to the sole proprietorship did not amount to a transfer to a third party but was merely a reorganisation of the same business, and hence not taxable.
The High Court accepted these contentions and quashed the impugned orders. It held that the issue was covered by its earlier judgment in Gujarat Chamber of Commerce and Industry v. Union of India (SCA No. 11345 of 2023), which held that such assignments or transfers of leasehold rights are transactions in immovable property and fall outside the ambit of “supply” under Section 7 of the CGST Act, 2017.
The HC quashed the impugned orders that had demanded GST, interest, and penalty from the petitioner, causing the Union of India to challenge the decision before the Supreme Court.
The Supreme Court said that one of the issues arising in the special leave petitions concerns this question.
“One of the issue arising in these special leave petitions is whether the assignment of leasehold rights constitute 'Transfer of Land' or amounts to 'Supply of Service' so as to make it liable for payment of GST”, the Court noted.
It noted that a similar matter is already pending consideration in another case and tagged the present petitions with that case.
Case no. – Special Leave Petition (Civil) Diary No. 52380/2025
Case Title – Union Of India & Anr. v. M/S Life Sciences Chemicals & Anr.
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