The assignment of leasehold rights does not qualify as a supply of services under the Central Goods and Services Tax Act, 2017 and is thus not subject to GST.

JUDGMENT :

ANIL L. PANSARE, J.

1. Heard.

2. Issue Rule, returnable forthwith. Mr. K.K. Nalamwar, learned Counsel waives service of Rule on behalf of the respondent. With consent of learned Counsels for the parties, the petition is taken up for final hearing.

3. The challenge is to the show cause notice dated 20-12-2024 issued by respondent No.1 calling upon the petitioner to show cause as to why goods and services tax amounting to Rs.27,00,000/- should not be demanded and recovered from the petitioner under sub-section (1) of Section 74 of the Central Goods and Services Tax Act, 2017 (for short “Act of 2017”) towards non payment of GST on transfer of leasehold rights.

4. The notice has been issued under Section 74 (1) of Act of 2017 on the ground that the petitioner has concealed a transaction where he has assigned his leasehold rights in the plot belonging to MIDC to Sumit Madanlal Pagariya, Proprietor of M/s. Rishita Industries for Rs.1,50,00,000/-. As such, it is undisputed that the leasehold rights have been assigned with consent of MIDC Hingna, Nagpur and that the petitioner has paid an amount of Rs.3,95,640/- by way of additional premium.

5. According to the respondents, this transfer of assignment of rights would amount to supply of services in terms of Section 7 (1) of the Act of 2017 read with sub-clause (b) of Clause 2 of Schedule II. For the purpose of ready reference, we reproduce relevant parts of and Clause 2(b) of Schedule II.

“7. Scope of supply:

(1) For the purposes of this Act, the expression - “supply” includes:

(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;

(1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II.

SCHEDULE II

[See section 7]

ACTIVITIES 1 [OR TRANSACTIONS] TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES.

2. Land and Building.

(a) any lease, tenancy, easement, licence to occupy land is a supply of services:

(b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services.”

6. As could be seen, sub-clause(b) of clause 2 of Schedule II indicates any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services.

7. In the case before us, the transaction under question is assignment of leasehold rights by the petitioner in favour of assignee-M/s. Rishita Industries, which admittedly is not a lease nor does it amount to sub-lease. In fact, in the show cause notice issued by respondent No.1, he has categorically mentioned that the transaction under question does not amount to sub-lease as the petitioner’s right stands extinguished by the said transaction. Respondent No.1 has recognized this transaction as seeking compensation to transfer rights in favour of the assignee. According to respondent No.1, this activity amounts to service classifiable under other miscellaneous services and is taxable at 18% under S. No. 35 of the Notification No.11/2017 CT (Rate) dated 28-06-2017.

8. Our attention is invited to the entry at Sr.No.1 which includes other services (washing, cleaning and dyeing services; beauty and physical well- being services, and other miscellaneous services including services nowhere else classified). A