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🚨 GST NOT APPLICABLE on Transfer of Leasehold Rights (MIDC / GIDC etc.) – Bombay HC Ruling 🚨

The Bombay High Court (Nagpur Bench) in Aerocom Cushions Pvt. Ltd. v. AC (CGST) (9 Jan 2026) has held that assignment of leasehold rights is NOT liable to GST.

🔑 Key Takeaways:

✅ Assignment ≠ Lease / Renting
Once leasehold rights are assigned, the original lessee’s rights are extinguished. It is not leasing or sub-leasing under Schedule II.

✅ Transfer of Immovable Property
Long-term leasehold rights (e.g. 95 years) amount to ownership-like rights. Their transfer is a transfer of immovable property, not a service.

✅ No “Supply” under Section 7
If the transaction is not in the course or furtherance of business, it fails the basic requirement of “supply” under GST.

✅ Cannot be taxed as “Other Miscellaneous Services”
Such classification is artificial and invalid. This category is meant for minor services, not property transactions.

✅ Schedule II cannot override Section 7
Schedule II only classifies activities; it cannot create taxability where Section 7 does not apply.

✅ Assignment ≠ Renting
Renting involves retention of rights and recurring consideration. Assignment is a permanent transfer for lump-sum consideration.

✅ Reliance on Gujarat HC upheld
Following Gujarat Chamber of Commerce & Industry v. UOI (2025) — assignment of leasehold rights is outside GST.

✅ High Court rulings binding nationwide
As per Godavari Devi Saraf (SC), unless a contrary ruling exists, such judgments bind tax authorities across India.

📌 GST still applies ONLY to:
• Lease premium charged by development authorities (subject to exemptions)
• Transfer / permission fees charged by authorities (taxable service)

🧾 Conclusion:
👉 Assignment of leasehold rights in industrial land/building is NOT a taxable supply under GST
👉 Section 74 SCNs on such transactions are invalid

⚠️ Issue may continue until settled by the Supreme Court, but this judgment is a major relief for MSMEs.