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• Assignment of Leasehold Rights on Land – Critical analysis

• Last Updated
• June 2, 2023

Table of Contents

Leasehold rights on land play a crucial role in various real estate transactions and business operations. Many units are set up on leasehold land provided by state industrial development corporation.

What Is Assignment Of Leasehold Rights?

• The assignment of leasehold rights on land refers to the transfer of the leasehold interest or rights from one party to another.
• It involves the transfer of the rights and obligations associated with a lease agreement from the original lessee (assignor) to a new party (assignee).

Leasehold rights on land typically arise when a lessee enters into a lease agreement with the lessor to use and occupy the land for a specific period, usually for commercial, industrial, or residential purposes. The lessee holds the leasehold rights, which include the right to possess and use the land within the terms and conditions outlined in the lease agreement.

However, there may be situations where the original lessee, for various reasons, decides to transfer or assign their leasehold rights to another party for consideration. This can occur when the lessee wants to exit the lease, restructure their business operations, or transfer the lease to a new owner.

The assignment of leasehold rights involves a formal agreement between the assignor and assignee that outlines the terms of the transfer. The assignor relinquishes their rights and responsibilities as the original lessee, while the assignee assumes those rights and obligations for the remaining lease term.

It is important to note that the assignment of leasehold rights does not necessarily involve the transfer of ownership of the land itself. The assignee steps into the shoes of the original lessee and continues to hold the leasehold interest for the remaining term specified in the lease agreement.

The assignment of leasehold rights on land can have various legal, financial, and operational implications for both the assignor and assignee. It is crucial for all parties involved to carefully review the terms of the lease agreement, understand their rights and obligations, and ensure compliance with any legal or regulatory requirements related to the assignment.

Income Tax Implication

Lease hold rights is a capital asset as per Section 2(14) of the Income Tax Act,1961 and Assignment of lease hold rights falls under definition of transfer u/sec. 2(47) of the Income Tax Act by way of relinquishment of rights in Immovable property.

• Assignment as discussed herewith results into capital gain tax implication u/sec. 45 of Income Tax Act.
• Leased Land Property assigned for a consideration is cost of Acquisition for the capital purpose. Holding period of Lease beyond 3 years is considered as long-term Capital Asset and tax rate applicable is 20% plus applicable surcharge and cess. Short term capital Asset has holding period less than 3 years and normal rate of tax would be applicable.
• Further, since the Lease hold right is neither a Land nor Building, provisions of Section 50C, which deems the Stamp Duty Value as Consideration in case if the actual consideration is less than Stamp Duty Value shall not apply.
• Wherein Capital Gains on Land is liable to be taxed as Long Term Capital Gains and Capital Gains on Structure is liable to tax short term capital gain.
• Other view is Entire Gains on Transaction is treated as short term capital gain.

GST Implications

The Goods and Services Tax (GST), introduced in India in 2017, has brought significant changes to the taxation system. It is important to understand the implications of GST on the assignment of leasehold rights on land and how it affects different stakeholders involved.

As per Section 7(1) of the CGST Act, 2017, supply” includes:

All forms of supply of goods or services or both, such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. Thus, under the GST regime, leasehold rights on land can be considered as a supply of services and thereby subject to taxation.

Upfront amount called as premium, salami, cost, price, development charges or by any other name payable in respect of long term lease of 30 years, or more of industrial plots or infrastructure development plots for financial business, provided by the State Government Industrial Development Corporations or Undertakings or by any other entity having 50 % or more ownership of Central Government, State Government, Union territory to the industrial units or the developers in any industrial or financial business area subject to following conditions:

• the leased plots shall be used for industrial or financial activity in an industrial or financial business area
• the State Government shall monitor and enforce the condition as per the order issued by the State Government
• in case of any violation or subsequent change of land use, the original lessor, original lessee as well as any subsequent lessee or buyer or owner shall be jointly and severally liable to pay tax along with the applicable interest and penalty
• the lease agreement entered shall incorporate in the terms and conditions that the tax was exempted on the long term lease of the plots by the original lessor to the original lessee subject to above condition and the parties to the said agreements undertake to comply with the same.

Thus, GST on assignment of lease hold rights has been classified as exempt only if it falls within the ambit of above entry satisfying all the conditions.

Contradictory View

As per Section 7(2)(a) of the CGST Act 2017 read along with Entry no. 5 of Schedule III, sale of land is treated neither as supply of goods nor as supply of services.

As per the Registration Act 1880, “immovable Property” includes land, buildings, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth, or permanently fastened to anything which is attached to the earth, but not standing timber, growing crops nor grass.

As per the General Clauses Act 1897:, “Immovable property’ shall include land, benefits to arise out of land, and things attached to the earth or permanently fastened to anything attached to the earth”.

Leasehold rights can be construed as benefit arising from land, thereby treating the same as Immovable Property or Land itself for the purpose of Registration Act attracting Stamp Duty and registration charges.  Thus, as per State Governments, the assignment of leasehold rights on land is considered as a transfer of ownership for state revenue purposes.

Irony created due to non-alignment of definition of Assignment of Lease hold rights under Registration Act and GST leading to double taxation as the individuals or businesses involved in the assignment of leasehold rights on land must comply with both the state revenue requirements, such as stamp duty and the GST obligations.

It is important to note that under the erstwhile service tax regime in India, the assignment of leasehold rights on land was specifically listed as an exempted service. This means that no service tax was applicable on such assignments, regardless of the purpose of the lease (residential, commercial, or industrial). The exemption from service tax on the assignment of leasehold rights was provided to avoid double taxation since the leasehold rights were considered immovable property, and the transfer of immovable property was already subject to other taxes, such as stamp duty.

Burning Issue In MIDC Areas For GST Matter

Thousands of units in Maharashtra including Thane, Navi Mumbai, Pune, Nagpur etc have not paid GST on assignment of lease considering this as sale of land and assuming that the exemption under Sr. No. 41 of notification No. 12/2017 dated 28.06.2017 would be available to them. However, it does not cover subsequent transfers of lease premium on assignment of leasehold right.

Also, there are many GST Advance Rulings stating that long term lease cannot be equivalent to sale of land and would be taxable under the GST law, thereby confirming GST on such supply.

Thus, the GST department has also started issuing notices under the CGST Act 2017 on the assignment of lease hold rights charging 18% GST on the total value of the assignment agreement.

While, the State Revenue department is considering this assignment of lease as sale of land and building and thus charging full stamp duty and registration charges accordingly.

The above contradictory views from the GST Laws and State Laws are creating multiplicity of taxes for the same transactions, which should not be viable in the eyes of the law. Thus, the government should hence analyse the situation and take pertinent action on urgent basis.

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Tax Insights: GST/HST issues relating to the assignment of agreements to purchase newly constructed condominiums

February 01, 2021

Issue 2021-03

The combination of rising home prices and the financial stress and uncertainty created by the COVID-19 pandemic is resulting in more condominium purchasers reconsidering their acquisition. While some buyers always planned to assign their agreements of purchase and sale (APS) to a third party, many other buyers that originally intended to lease or reside in their condominium units are also assigning their APS. There are a number of reasons for this, one of which is a reduction in the demand for rental condominiums in many Canadian cities. As discussed in a recent Tax Court of Canada decision, Chen Sun v. The Queen, 2020 TCC 112, there are many Goods and Services Tax/Harmonized Sales Tax (GST/HST) issues to consider when an APS is assigned to a third party, including whether:

• GST/HST is payable by the assignee on the assignment fee and the amount attributable to the deposit that was paid by the assignor to the builder of the property
• the assignee is eligible to claim the GST/HST new housing rebate
• the new housing rebate can be assigned to the builder and credited against the purchase price

Is the assignment of an APS a taxable supply

The assignment of an APS will constitute a taxable supply, unless it qualifies for an exemption. This is because “real property” is defined to include an interest in real property, and the making of a supply of real property (other than an exempt supply) is deemed to be made in the course of a “commercial activity.” The sale of an interest in a residential complex by a person that is not a “builder” is generally exempt; however, the sale of an interest in a new home or condominium is generally subject to GST/HST when the assignor is a “builder.”

A “builder” is defined in a manner which can potentially include someone that is merely entering into an APS with a builder. For example, subject to a specific exclusion that only applies to individuals, someone that acquires an interest in a home before it is occupied (or a condominium before it is registered) can be a builder if their primary purpose was to either:

• sell the home to any person
• lease the home to someone other than an individual for their personal use

Individuals are excluded from being a builder if they did not acquire their interest in the course of a business or an adventure or concern in the nature of trade, which is determined by considering the following factors:

• nature of the property sold
• length of period of ownership
• frequency or number of other similar transactions by the taxpayer
• work expended on or in connection with the property realized
• circumstances that were responsible for the sale of the property
• taxpayer’s motive or intention

To the extent that the assignor is a “builder,” GST/HST will be payable on the value of consideration that is paid by the assignee and the assignor will be required to collect GST/HST unless the assignee is registered for GST/HST.

The Canada Revenue Agency (CRA) considers an amount paid by an assignee on account of the assignor’s deposit to be part of the consideration paid for the assignment of an APS, and is therefore subject to GST/HST if the assignor is a builder. Accordingly, unless the assignment is restructured to result in the builder refunding the deposit to the assignor and receiving a replacement deposit from the assignee, the assignee may pay double tax on the deposit. It is also important to note that the Tax Court of Canada’s decision in Casa Blanca Homes Ltd. v. The Queen, 2013 TCC 338 contradicts the CRA’s view. In Casa Blanca Homes Ltd., the Tax Court of Canada held that the amount paid to the assignor relating to the deposit constituted an exempt supply of a financial service and would therefore not be subject to GST/HST.

Can the assignee claim the GST/HST new housing rebate

The assignment of an APS may also impact the assignee’s eligibility to claim the new housing rebate, as evidenced by the Tax Court of Canada’s recent decision in Chen Sun. The federal new housing rebate is equal to 36% of the federal component of GST/HST paid, up to a maximum of $6,300 (for homes valued at $350,000), with the rebate being gradually reduced and phased out when the value of the home reaches $450,000. For properties in Ontario, the provincial new housing rebate is equal to 75% of the provincial component of GST/HST paid, up to a maximum of $24,000 (for homes valued at $400,000 or higher).

For a purchaser to be eligible for the new housing rebate, the following conditions must be met:

• the purchaser must be an individual that is acquiring the home from a builder, as opposed to an assignor who may not be a builder
• at the time the individual becomes liable or assumes liability, they must acquire the home as their primary place of residence or that of a relation
• ownership of the property must be transferred to the individual after construction is substantially completed
• the first person to occupy the home must be the individual or a relation
• all persons named on the APS must meet the aforementioned conditions

When the purchaser qualifies for the new housing rebate, the builder is generally entitled to pay or credit the rebate amount to the purchaser pursuant to subsection 254(4) of the Excise Tax Act.

In situations where a third party is acquiring ownership of a home or condominium and they receive title directly from the builder, it does not necessarily mean that the APS has been assigned to the third party and that the builder has sold the condominium to the assignee. As argued by the Crown in Chen Sun, if the builder has not accepted the assignment, then the assignee may not be the person that is acquiring the condominium from the builder. Fortunately, in Chen Sun, the court ultimately held that the APS was in fact assigned on the basis that the builder, by its conduct, accepted the assignment and therefore the builder did sell the condominium directly to the assignee. Accordingly, the assignee was eligible to claim the new housing rebate (and the builder was entitled to credit the assignee with the rebate) because the assignee acquired the condominium from the builder and the other conditions to claim the rebate were satisfied.

How should builders deal with assignments

As the builder and purchaser are jointly and severally liable for housing rebates that have been claimed in error, it is important for builders to make sure that purchasers qualify for the rebate before they pay or credit the purchaser with the rebate. The CRA heavily scrutinizes rebate claims and, to the extent each and every condition to claim the rebate is not satisfied, the CRA will deny the rebate claim. In situations where an APS has been assigned, builders should consider whether:

• they should credit the assignee with the housing rebate or advise the assignee to file the rebate claim directly with the CRA
• it is easier to “tear” up the original APS and enter into a new APS with the assignee
• the assignment has been clearly documented so that there is no dispute that the assignee has become the purchaser under the APS, which may not be the case when only the title is transferred to the assignee at the assignor’s direction

The takeaway

All parties to a transaction in which an APS is being assigned and a housing rebate is being claimed should consider the GST/HST implications of the assignment. Failure to structure these assignments in an appropriate manner can significantly increase GST/HST costs for the respective parties, including:

• builders being assessed penalties for erroneously crediting the housing rebate to assignees
• assignors being assessed penalties for failing to collect tax on the assignments
• assignees paying GST/HST on the replacement deposits

PwC can help structure these assignments in a tax-efficient manner.

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GST on long term lease arrangements: What you need to know

The Purchase of land on a freehold basis or on a long-term lease basis (say for 99 years or a longer period) is a normal practice prevalent in most parts of India. Most projects in large metro cities like Delhi-NCR, Mumbai, Bangalore etc. are built on leasehold plots.  

The important question that needs examination from a GST standpoint are whether such long-term lease arrangements are liable to GST. If yes, whether the lessee in eligible to claim input tax credit of GST paid on the one-time consideration paid for acquiring such leasehold rights. 

Taxability of long-term leases 

Under the Constitution of India, land is classified as a State subject and tax on land and building is considered as the state’s revenue vide Entry No 49 of List II – State List and thus outside the ambit of GST.  

Whether long term lease of land (say for 99 years or even higher) for a one-time consideration (which is known as premium or salami etc.) can be equated with outright sale of land, has been a matter of intense judicial scrutiny under the erstwhile tax regime and other laws.  

In the context of RERA regulations, the courts have held that a lease for 99 years or more is akin to a sale or mortgage. Mere use of the word ‘lease’ or the fact that a long term is fixed would not by itself make the arrangement a lease.  

However, under the GST law, the term ‘supply’ has been defined in an inclusive manner to cover all forms of supply of goods or services such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for consideration by a person in the course or furtherance of business. Further, schedule II of the CGST Act specifically covers lease, tenancy, easement, license to occupy land as supply of service.  

Given this, it appears that a lease of land (whether short term or long term) qualifies as ‘supply of service’ and hence is liable to GST. 

Appreciating the fact that a long-term lease of land (for more than 30 years) is akin to a transfer of land per-se , GST exemption has been provided for select categories of lease arrangements provided by governments or government-aided organisations. The lease arrangements not within the ambit of the said exemption remain exposed to GST as supply of service.  

Input tax credit (‘ITC’) eligibility   

The other question for consideration is whether the lessee who intends to construct a building on this leasehold land can claim ITC of the GST so paid on leasehold consideration. 

Recently, the advance ruling authorities of various states have ruled that ITC is not available in respect of GST paid on land lease transactions on account of specific restrictions carved out under section 17(5) of the CGST on goods and services supplied for construction of immovable property.  

Given this, the department is challenging the credit eligibility of GST charged on consideration paid for acquisition of leasehold rights. 

Ask from the Government  

It is important for the Government to release a circular/guidance paper addressing the credit eligibility on long-term lease arrangements to avoid high stake litigation at a later stage.   While clarifying the credit eligibility on long-term lease arrangements, the following factors should be taken into consideration:  

• The restriction carved out under section 17(5) of the CGST Act, is limited to only those goods and services which have a direct nexus with the construction activity such as the services of an engineer or contractor or architect or an interior decorator etc. 
• Provision of land is a sine-qua-non and the same cannot be considered as ‘input’ or ‘input service’ used for construction of an immovable property.  
• The restrictions carved out under section 17 of the CGST Act should be read strictly and narrowly as seamless flow of credits is one of the fundamental principles behind implementation of GST. 

(The article is authored by Kishore Kumar who  is a Lead-GST and Customs at Taxmann Allied Services Pvt. Ltd.)

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of ET Edge Insights, its management, or its members

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WB AAR | Will GST be applicable for assignment of leasehold right on land? GST applicability discussed

West Bengal Authority for Advance Ruling, GST (WB AAR): A Division Bench of Susmita Bhattacharya and Parthasarathi Dey (Members) while addressing the

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West Bengal Authority for Advance Ruling, GST (WB AAR): A Division Bench of Susmita Bhattacharya and Parthasarathi Dey (Members) while addressing the present application with regard to the applicability of GST on “assignment of leasehold right” held that,

The activity of assignment is in the nature of agreeing to transfer one’s leasehold rights. It does not amount to further sub-leasing, as the applicant’s rights as per the Deed of sub-lease stands extinguished after assignment. Neither does it create fresh benefit from the land. It is in the nature of compensation for agreeing to do the transfer of the applicant’s rights in favour of the assignee. It is a service classifiable under “Other miscellaneous service‟ (SAC 999792) and taxable @ 18%.

National Company Law Tribunal, Kolkata Bench admitted the applicant as the corporate debtor and passed an order under Section 33 of the Insolvency and Bankruptcy Code, 2016 to start the process of liquidating the corporate debtor.

One of the assets under liquidation is the leasehold property unit along with care parking space (Demised Premises). West Bengal Industrial Development Corporation Ltd. granted the applicant possession of the Demised Premised for 99 years under a registered deed.

Applicant submitted that according to clause 12.28 of the deed, applicant, after the expiry of at least five years from the date of the Deed coming into force, is entitled to assign to another person the unexpired residual period of the sub-lease after taking written approval of the sub-lessor and on payment of transfer fee, being 10% of the prevailing market value of the property as assessed by the Registering Authority of the State Government.

Question for consideration:

Liquidator raised the question as to whether GST is payable on the consideration receivable on such assignment. If so, what should be the SAC and the rate applicable? He also seeks clarity on whether he can claim input tax credit for the GST paid on the transfer fee.

Officer Concerned from the Revenue submitted that the assigning of the sub-lease is a service classifiable under the heading “Other Miscellaneous Services‟ (SAC 99979) and taxed accordingly.

Observations of the Authority

Scope of supply under Section 7 (1) of the GST Act includes all forms of supply of goods and services, including a sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made.

Bench noted that the benefits arising from land in the forms specified in paragraph 2 of Schedule II are not to be treated as transactions in immovable property but as the supply of service for the purpose of the GST Act.

Deed | Service Contract of Lease

Authority stated that the Deed confers upon the applicant no better title to the Demised Premises other than a service contract of lease.

Applicant can only transfer to the assignee his right to receive the service of the lease for the unexpired period after obtaining prior approval of the Sub-lessor on payment of the transfer fee.

Conditional Possession

Hence, it is clear that the applicant, apart from the conditional possession of the Demised Premises, enjoys no title or ownership, which is central to the sale of any immovable property within the meaning of Section 54 of the Transfer of Property Act, 1882.

Therefore, the assignment does not amount to transfer of any benefit other than leasehold rights in terms of the Deed for the unexpired period of the lease and is no transfer of any immovable property in the context of the GST Act.

Thus, the activity of assignment of leasehold right is a service classifiable under ‘Other miscellaneous service‟ (SAC 999792) and taxable @ 18% under Sl No. 35 of Notification No. 11/2017 – CT (Rate) dated 28/06/2017 (State Notification No. 1135- FT dated 28/06/2017), as amended from time to time.

Further, the transfer fee charged by the Sub-lessor is in the nature of a consideration for tolerating an act that the applicant is otherwise refrained from doing in terms of clause 12.28 of the Deed. It is also a service classifiable under “Other miscellaneous service‟ (SAC 999794) and taxable @ 18% under Sl No. 35 of the Rate Notification. [Enfield Apparels Ltd. In Re., 2020 SCC OnLine WB AAR-GST 7 , decided on 10-08-2020]

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GST Chargeable on Transfer of Leasehold Rights: AAR

Yash Khurmi | August 26, 2021 August 26, 2021 | Business compliance , Business Updates , GST , GST return filing , News

All stakeholders must note GST is chargeable on Transfer of Leasehold Rights. As per the latest notification by AAR(Authority for Advance Ruling), GST should be levied while transferring Leasehold rights. Thus it is an important notification as many people aren’t aware about the GST Rate and its applicability on transfer of Leasehold Rights. In this article, we will understand this new notification on GST Chargeable on Transfer of Leasehold Rights in detail.

What does Leasehold Rights mean?

A leasehold is an accounting word that refers to an item or property which the leaser (renter), in exchange for regular payments, contracts to lease from a leaser (ownership) for an agreed period of time. As per Leasehold Rights, one has the right to remain and utilize the property for a specified duration, if you have acquired a tenant building or Leasehold property.

The ownership of the property is returned to the landowner once the term of the lease ends.

Query on GST Rates on Transfer of Leasehold Rights

The applicant, India Pistons Limited has stated that they are engaged in the manufacturing of goods and were allotted land measuring to an extent of 15.34 acres. The State Industrial Promotion Corporation of Tamilnadu (SIPCOT) was responsible for allocating the land.

Subsequent to the above allotment, there were certain lands allotted to them and remained unutilized.

However,  the Government of Tamilnadu entered into an MOU (Memorandum of Understanding) with M/s. INOX Air Products Private Limited for setting up a state-of-the-art Ultra High Purity Cryogenic Liquid Medical and Industrial Oxygen Plant.

As per this MOU, they agreed to transfer the property admeasuring 5 acres to INOX for Rs. 15 Crores for the leasehold rights and Rs. 24 lakhs for superstructures.

As a result, SIPCOT granted approval for the transfer of balance period of leasehold rights measuring 5.00 acres of land along with existing shed/superstructures, out of 15.34 acres at SIPCOT Industrial Complex, Hosur Phase-II from them to INOX.

Thus, India Pistons Limited approached AAR Tamil Nadu to know –

• Whether GST is applicable on the transfer of leasehold rights while considering Rs. 15 Crores received by them from M/s. INOX Air Products Private Limited for the land allocated by State Industrial Promotion Corporation of Tamilnadu?
• Would Inox Air Products Private Limited be subject to the ‘Supply’ definition in Section 7 of the Goods and Services Act 2017 as a result of the subsequent transfer of SIPCOT land from an applicant to an applicant?

GST chargeable on Transfer of Leasehold Rights

In its recent judgment in Indian Pistons Limited, the Tamil Nadu Advance Ruling Authority (AAR) states that the transfer of rental rights is a taxable act. Therefore, it is a taxable service and it is classified as ‘Other Miscellaneous Services’ with SAC 9997 code.

To know more about SAC Codes, you can visit – List of SAC Code with Tax Rates 

Rate of GST chargeable on Transfer of Leasehold Rights

As per the Tamil Nadu Advance Ruling Authority(AAR) the 18% GST rate is payable on the transfer of leasehold rights. The eighteen percent GST Rate comprises both SGST and CGST each having 9 percent.

In simple words, while transferring Leasehold Rights in India, the stakeholders have to pay 9% GST to the state government. And similarly 9% GST to the central government.

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Assignment of leasehold rights for the unexpired residual period is liable to GST

2020 acr 243 aar west bengal m/s enfield apparels ltd (authority for advance rulings) ms susmita bhattacharya, joint commissioner, cgst & cx mr parthasarathi dey, additional commissioner, sgst 05/wbaar/2020-21 dated 10/08/2020.

Applicant is entitled to assign to another person the unexpired residual period of the sub-lease after taking written approval of the Sublessor and on payment of transfer fee, being 10% of the prevailing market value of the property as assessed by the Registering Authority of the State Government.

The benefits arising from land in the forms specified in paragraph 2 of Schedule II are not to be treated as transactions in immovable property but as the supply of service for the purpose of the GST Act.

Apart from the conditional possession of the Demised Premises, the applicant enjoys no title or ownership, which is central to sale of any immovable property within the meaning of section 54 of the Transfer of Property Act, 1882. The applicant’s interest in the benefits arising out of the Demised Premises is limited to sub-leasing in terms of the Deed, and he is capable of transferring the benefits only to that extent. The assignment, therefore, does not amount to transfer of any benefit other than leasehold rights in terms of the Deed for the unexpired period of the lease and is no transfer of any immovable property in the context of the GST Act.

The activity of assignment is in the nature of agreeing to transfer one’s leasehold rights. It does not amount to further sub-leasing, as the applicant’s rights as per the Deed stands extinguished. Neither does it create fresh benefit from land other than the leasehold right. It is like a compensation for agreeing to do the transfer of the applicant’s rights in favour of the assignee. It is a service classifiable under “Other miscellaneous service” (SAC 999792) and taxable @ 18% under Sl No. 35 of Notification No. 11/2017 – CT (Rate) dated 28/06/2017 (State Notification No. 1135FT dated 28/06/2017).

Similarly, the transfer fee charged by the Sub-lessor is in the nature of a consideration for tolerating an act that the applicant is otherwise refrained from doing. It is also a service classifiable under “Other miscellaneous service” (SAC 999794) and taxable @ 18% under Sl No. 35 of the Rate Notification. It is the consideration payable to the Sub-lessor for providing a service in the course or furtherance of business, more specifically because business includes supply or acquisition of goods or services in connection with the closure of a business in terms of section 2 (17) (d) of the GST Act. The GST to be paid on such transfer fee is, therefore, admissible as input tax credit.

For the applicant:  Arup Dasgupta, FCA

A person within the ambit of Section 100 (1) of the Central Goods and Services Act, 2017 or West Bengal Goods and Services Act, 2017 (hereinafter collectively called “the GST Act”), if aggrieved by this Ruling, may appeal against it before the West Bengal Appellate Authority for Advance Ruling, constituted under Section 99 of the West Bengal Goods and Services Act, 2017, within thirty days from the date of communication of this Ruling, or within such further time as mentioned in the proviso to Section 100 (2) of the GST Act.

Every such appeal shall be filed in accordance with Section 100 (3) of the GST Act and the Rules prescribed thereunder, and the Regulations prescribed by the West Bengal Authority for Advance Ruling Regulations, 2018.

• Admissibility of the Application

1.1 The National Company Law Tribunal (hereinafter NCLT), Kolkata Bench, passed an order on 06/08/2018, initiating the corporate insolvency resolution process (hereinafter CIRP), admitting the applicant as the corporate debtor, and appointed Sri Kanchan Duatta as Interim Resolution Professional (IRP). The Committee of Creditors (hereinafter CoC) subsequently confirmed Sri Dutta as the Resolution Professional (RP). During the CIRP, the RP and the CoC did not receive any resolution plan. The NCLT, therefore, passed another order on 04/04/2019 under section 33 of the Insolvency & Bankruptcy Code, 2016 (hereinafter the IBC) to start the process of liquidating the corporate debtor and appointed Sri Dutta as the Liquidator. He has obtained separate registration as a distinct person (GSTIN 19AABCE8762F4ZC) in terms of Notification No. 11/2020 – Central Tax dated 21/03/2020).

1.2 One of the assets under liquidation is the leasehold factory unit along with car parking space situated at Paridhan Garment Park at 19 Canal South Road, Kolkata – 700015 (hereinafter the Demised Premises). The West Bengal Industrial Development Corporation Ltd (hereafter the Sub-lessor) granted the applicant possession of the Demised Premises for ninety-nine years under a registered deed of sub-lease dated 06/08/2010 (hereinafter the Deed) on payment of an up-front premium of Rs 5.07 crore and monthly lease rental of Rs 21,000/-. According to clause 12.28 of the Deed, the applicant, after the expiry of at least five years from the date of the Deed coming into force, is entitled to assign to another person the unexpired residual period of the sub-lease after taking written approval of the Sublessor and on payment of transfer fee, being 10% of the prevailing market value of the property as assessed by the Registering Authority of the State Government.

1.3 The Liquidator wants to know whether GST is payable on the consideration receivable on such assignment. If so, what should be the SAC and the rate applicable? He also seeks clarity on whether he can claim input tax credit for the GST paid on the transfer fee. Both the questions are admissible under section 97 (2) (a), (b), (d) & (e) of the GST Act.

1.4 The applicant declares that the questions raised are not pending before or disposed of by any authority in any proceedings under the GST Act. The concerned officer from the revenue does not object to the admission of the application. The application is, therefore, admitted.

• Submissions of the Applicant

2.1The applicant submits that leasehold right to immovable property is an immovable property. He refers to section 3 (26) of the General Clauses Act, 1897, which defines immovable property to include land, benefits to arise out of the land and things attached to the earth, or permanently fastened to anything attached to the earth. The phrase „benefits to arise out of land‟ is relevant. According to the applicant, it means the interest in land. Even the transfer of development rights in the land through joint development is treated as the sale of land. The applicant refers to several case laws in support of his argument [Mati Lal Daga and Ors vs (Sri Sri) Iswar Radha Damodar, AIR 1936 Cal 727; Girnar Traders vs State of Maharashtra, (2011) 3 SCC 1; Chheda Housing Development vs Bibijan Shaikh Farid and Ors, (2007) 3 MhLJ 402].

2.2 The applicant, therefore, concludes that lease simpliciter alone should attract levy of GST. Assignment of leasehold rights on land, on the other hand, is nothing but the transfer of immovable property akin to the sale of land and buildings, and no GST is leviable on such assignments. “Sale” means the transfer of property or title for a price. Assignment of the leasehold rights effectively transfers possession and title to the assignee for a price. It is nothing but a sale of the building.

2.3 At this point the applicant tries to distinguish his case from the judgments in Builders Association of Navi Mumbai [(2018) 12 GSTL 232 (Bom)] and Greater Noida Industrial Development Authority [(2015) 40 STR 95]. He contends that the High Courts in the above cases have dealt with leasing, which is different from the assignment of leasehold rights. The rulings pronounced based on those two judgments [Greentech Mega Food Park Pvt Ltd, (2019) 27 GSTL 143 (AAR, Rajasthan) and Goa Tourism Development Corporation Ltd, (2018) 19 GSTL 700 (AAR, Goa)], therefore, are not tenable.

2.4 The applicant now draws attention to the question of admissibility of the input tax credit, being the GST to be paid on the transfer fee. According to the applicant, such transfer fee is the consideration payable to the Sub-lessor for rendering service in the course or furtherance of business, more specifically because business includes in terms of section 2 (17) (d) of the GST Act supply or acquisition of goods or services in connection with the closure of a business. The applicant, therefore, argues that GST to be paid on such transfer fee is admissible as input tax credit in the event it is ruled that the assignment of leasehold right is a supply of taxable service.

• Submissions of the concerned officer from the revenue

3.1 The applicant’s argument described in paragraphs 2.1 to 2.3 above is not discussed in the submissions of the concerned officer from the revenue. He submits that the assigning of the sub-lease is a service classifiable under the heading “Other Miscellaneous Services” (SAC 99979) and taxed accordingly.

4.  Observations and findings of the Authority

4.1 Section 3(26) of the General Clauses Act, 1897 defines “immovable property” as to include land, benefits to arise out of the land , and things attached to the earth, or permanently fastened to anything attached to the earth. Applicability of the General Clauses Act, 1897 in the context of a Special Act like the CGST Act, 2017, however, is limited to areas where no express provisions are made under the said Special Act.

4.2 Scope of supply under section 7 (1) of the GST Act includes all forms of supply of goods and services, including a sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made. Section 7 (1A) read with Schedule II under the GST Act provides which of such supplies shall be treated as supply of goods or services. Paragraph 2 of Schedule II provides that with respect to transactions relating to land and buildings, any lease, tenancy, easement, license to occupy the land, letting out of a building including a commercial, industrial or residential complex for business or commerce is the supply of services. In other words, benefits arising from land in the forms specified in paragraph 2 of Schedule II are not to be treated as transactions in immovable property but as the supply of service for the purpose of the GST Act. The Deed, therefore, confers upon the applicant no better title to the Demised Premises other than a service contract of lease. He can, therefore, transfer to the assignee only his right to receive the service of the lease for the unexpired period after obtaining prior approval of the Sub-lessor on payment of the transfer fee.

4.3 Clause 11 of the Deed provides the rights of the Sub-lessee. They include the right to have peaceful possession of the Demised Premises on regular payment of the lease rental and compliance to the conditions and restrictions enumerated under clause 12 of the Deed. A conjoint reading of the two clauses makes it clear that the Sub-lessor allows the applicant possession of the Demised Premises for the manufacture of garments and textiles. The Demised Premises shall not be used for residential use or any unlawful activity, nor shall be structurally altered in any way. The sub-lease may be terminated if the Sub-lessee fails to pay the lease rental or maintenance charges, fails or delays in commencing commercial operation, discontinues the business, fails to maintain good labour practice or breaches any terms of the Deed.

4.4 It is evident from the above discussion that the applicant, apart from the conditional possession of the Demised Premises, enjoys no title or ownership, which is central to sale of any immovable property within the meaning of section 54 of the Transfer of Property Act, 1882. The applicant’s interest in the benefits arising out of the Demised Premises is limited to sub-leasing in terms of the Deed, and he is capable of transferring the benefits only to that extent. The assignment, therefore, does not amount to transfer of any benefit other than leasehold rights in terms of the Deed for the unexpired period of the lease and is no transfer of any immovable property in the context of the GST Act.

4.5 The applicant’s reference to the case laws where joint development right is treated as the sale of an immovable property (refer to para 2.1 above) needs to be distinguished. None of those cases is decided in the context of the GST Act, where the provisions of paragraph 2 of Schedule II curve out certain benefits arising out of the land from the realm of immovable property and treat them as “service” for the purpose of the GST Act. The reference to the above case laws is, therefore, not relevant.

4.6 The activity of assignment is in the nature of agreeing to transfer one’s leasehold rights. It does not amount to further sub-leasing, as the applicant’s rights as per the Deed stands extinguished. Neither does it create fresh benefit from land other than the leasehold right. It is like a compensation for agreeing to do the transfer of the applicant’s rights in favour of the assignee. It is a service classifiable under “Other miscellaneous service” (SAC 999792) and taxable @ 18% under Sl No. 35 of Notification No. 11/2017 – CT (Rate) dated 28/06/2017 (State Notification No. 1135FT dated 28/06/2017), as amended from time to time (hereinafter collectively called the Rate Notification).

4.7 Similarly, the transfer fee charged by the Sub-lessor is in the nature of a consideration for tolerating an act that the applicant is otherwise refrained from doing in terms of clause 12.28 of the Deed. It is also a service classifiable under “Other miscellaneous service” (SAC 999794) and taxable @ 18% under Sl No. 35 of the Rate Notification. It is the consideration payable to the Sub-lessor for providing a service in the course or furtherance of business, more specifically because business includes supply or acquisition of goods or services in connection with the closure of a business in terms of section 2 (17) (d) of the GST Act. The GST to be paid on such transfer fee is, therefore, admissible as input tax credit.

Based on the above discussion, we rule as under,

The activity of assignment is in the nature of agreeing to transfer one’s leasehold rights. It does not amount to further sub-leasing, as the applicant’s rights as per the Deed of sub-lease stands extinguished after assignment. Neither does it create fresh benefit from the land. It is in the nature of compensation for agreeing to do the transfer of the applicant’s rights in favour of the assignee. It is a service classifiable under “Other miscellaneous service” (SAC 999792) and taxable @ 18% under Sl No. 35 of Notification No. 11/2017 – CT (Rate) dated 28/06/2017 (State Notification No.1135-FT dated 28/06/2017), as amended from time to time.

The transfer fee charged by the Sub-lessor is the consideration payable to the Sublessor for providing a service in the course or furtherance of business, more specifically because business includes supply or acquisition of goods or services in connection with the closure of a business in terms of section 2 (17) (d) of the GST Act. The GST to be paid on such transfer fee is, therefore, admissible as input tax credit.

This Ruling is valid subject to the provisions under Section 103 until and unless declared void under Section 104(1) of the GST Act.

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18% GST applicable on Assignment of Leasehold Right on Land: AAR [Read Order]

The West Bengal Authority of Advance Ruling (AAR) ruled that assignment of leasehold right on land is taxable at the rate of 18% under GST.

The NCLT passed an order, initiating the corporate insolvency resolution process (CIRP), admitting the applicant as the corporate debtor, and appointed Kanchan Duatta as Interim Resolution Professional (IRP). The Committee of Creditors (CoC) subsequently confirmed Dutta as the Resolution Professional (RP).

During the CIRP , the RP and the CoC did not receive any resolution plan. The NCLT , therefore, passed another order under section 33 of the Insolvency & Bankruptcy Code, 2016 (IBC) to start the process of liquidating the corporate debtor and appointed Sri Dutta as the Liquidator. He has obtained separate registration as a distinct person in terms of Notification No. 11/2020 – Central Tax dated March 21, 2020.

One of the assets under liquidation is the leasehold factory unit along with car parking space. The West Bengal Industrial Development Corporation Ltd granted the applicant possession of the Demised Premises for 99 years under a registered deed of sub-lease on payment of an up-front premium of Rs 5.07 crore and monthly lease rental of Rs 21,000.

According to clause 12.28 of the Deed, the applicant, after the expiry of at least 5 years from the date of the Deed coming into force, is entitled to assign to another person the unexpired residual period of the sub-lease after taking written approval of the Sub-lessor and on payment of transfer fee, being 10% of the prevailing market value of the property as assessed by the Registering Authority of the State Government.

The Liquidator sought advance ruling on the issue whether GST is payable on the consideration receivable on such assignment. If so, what should be the SAC and the rate applicable.

The other issue raised was whether he can claim input tax credit for the GST paid on the transfer fee.

The two member bench of Susmita Bhattacharya and Parthsarthi Dey ruled that the activity of assignment is in the nature of agreeing to transfer one’s leasehold rights. It does not amount to further sub-leasing, as the applicant’s rights as per the Deed of sub-lease stands extinguished after assignment.

The AAR further ruled that neither does it create fresh benefit from the land. It is in the nature of compensation for agreeing to do the transfer of the applicant’s rights in favour of the assignee. It is a service classifiable under ‘Other miscellaneous service’ (SAC 999792) and taxable at the rate of 18% under Sl No. 35 of Notification No. 11/2017 – CT (Rate) dated June 28, 2017.

The Authority further ruled that the transfer fee charged by the Sub-lessor is the consideration payable to the Sublessor for providing a service in the course or furtherance of business, more specifically because business includes supply or acquisition of goods or services in connection with the closure of a business in terms of section 2 (17) (d) of the GST Act. The GST to be paid on such transfer fee is, therefore, admissible as input tax credit .

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GST on Lease Transactions

A lease is a contractual arrangement between Owner (lessor) & user (lessee) whereby one party, the lessor, grants the right to use a particular assets (such as a parcel of land, building, equipment, or machinery etc) for a specific period and under specified conditions to the other party, the lessee.

Leases are broadly classified into two categories :

1) Finance Lease

Finance lease is relatively for a longer period which is sufficient to amortise the capital invested by the lessor (owner) & leave some profit. It involves transfer of all risk & rewards associated with the ownership of assets to the lessee but the title may or may not be transferred at the end of lease period.

2) Operating Lease/Service lease/Maintenance lease

Operating lease is relatively for a short period of time. The lease period is shorter than economic life of the assets. Operating lease require the lessor to maintain & service the leased assets.

The taxable event in GST is  “supply” of goods or services or both. So a transaction to become taxable it must covers within the meaning & scope of “supply”

As per Sec 7 of the CGST Act, 2017 , the expression supply includes 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;

As per Sec 2(83). “outward supply” in relation to a taxable person, means supply of goods or services or both, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business.

From the above discussion, it is cleared that the term “lease” is covered within the meaning & scope of “supply” and it is a taxable supply.

The term lease has not been defined anywhere in GST Act or Rules. To classify a lease transaction as either supply of goods or supply of service, we have to refer  Schedule II of the CGST Act, 2017 where in clear guidelines for classification of a  transaction as either “supply of goods” or “supply of services” has been enumerated, based on certain parameters :-

1) Any transfer of the title in goods is a supply of goods ;

2) Any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services ;

3) Any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods .

4) Any lease, tenancy, easement, licence to occupy land is a supply of services;

5) A ny 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 .

From the above it can be infer that GST does not differentiate between Finance & Operating Leases. What is important is whether “transfer of title” involves in the lease transactions or not.

a) If the lease agreement stipulates transfer of title : Supply of goods

b) If the lease agreement does not stipulates transfer of title : Supply of services

Note : A mere option to buy the assets at the end of lease period will not cover within the meaning of “Transfer of Title”.

GST Rates on Lease transactions

1) lease of industrial plots, provided by the State Government Industrial Development Corporations or Undertakings to industrial units- Nil Rate

2) Leasing of Agro Machinery/ Vacant land     – Nil Rate

3) GST on Lease transactions which will be covered under the category of “Supply of Services” shall be chargeable at same rate as on supply of similar goods.

4) Notification No. 37/2017-Central Tax (Rate) Dated 13 th October 2017

In respect of Vehicles purchased and leased prior to July 1, 2017, GST rate on such transaction shall be  65% of the GST rate (including compensation cess) applicable on similar kind of vehicle. These rates would apply for a period of three years with effect from 1 st July 2017, i.e up to 30 th June 2020.

5) Leasing of aircrafts under Schedule II [5 (f)] by a scheduled airlines for scheduled operations- 5%

*The Author is a Fellow member of The Institute of Chartered Accountants of India , New Delhi & Fellow member of The Institute of Cost Accountants of India, Kolkata and can be reached at [email protected] , WhatsApp 9805072910

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12 Comments

Sir, I as per lease agreement water charges imposed on lesee How to raise billat waht GSt Rate and HNS code for water charges ?

In my view, providing water is part of supply of operational lease service. Hence, GST as applicable to lease service is also applicable to providing water.

Is the GST applicable to the lessee and the sub-lessee in case a commercial property is leased with the authority to sub-lease the same and the rent received on sub-lease to be enjoyed by the lessee

Whether GST is payable on payment of lease rent for a flat, of which advance is already made（ Cost of flat）. If yes, then at what rate GST will be charged？

A Multipurpose Co-operative Society registered under GST supplying both taxable and tax free items is also giving some agricultural machinery (e.g Tractor) on rent to villagers, So my question is whether GST is to be charged on rent receivable ?and if yes at what rate and whether Society is eligible to claim ITC on machinery that is given on rent?

We are planning lease rights of one of pvt ltd Company the land snd building dhed is belong to M zI D C for 99 year lease we are buyi it after paying primium to MI D C is this transaction attract GST if so then can get credit of same pl reply

Kindly help me out by resolving the issue “as to whether any gst is payable on conversion (improvement) of title of land under a house [(already allotted to me on lease hold basis for 99 years by Chandigarh Housing Board (CHB) – a Govt. organisation (like DDA in Delhi)] from lease-hold to free-hold’ since 18% gst has been demanded by CHB on conversion (of title of land) charges ?

I am leasing out a building for business purpose.I want to register a lease deed in sub registrar office. The monthly lease rent is Rs.25000. Should I take SGT on this rent for calculating AAR( Average Annual Rent). Lease period is 15 yrs with 5% increment on rent every year.

We are planning to purchase colour tinting machines and install the same at our dealer points.The machines are capitalised in our books. After a specified short period of time 4years we shall transfer the titile thru. sale to the dealer at some value.

Whether ITC credit on this we can avail at the time of procurement. GST implicationin at the time of shifting the title to the dealers.

Good afternoon sir IF THE WEEKLY SHANDY LEASE WHETHER WE COLLECT THE GST FROM THE LEASEE

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GST update on taxability of assignment of leasehold right in immovable property

Sale of land is out of the ambit of GST Act as it is an entry in the schedule III but there are some services related with the land are liable to GST. These services include:

• Construction services wherein consideration is received prior to completion certificate.
• Leasing services associated with the land.

Now the latest update is regarding taxability of assignment of leasehold right in immovable property and admissibility of input tax credit thereon which was raised before the AAR in the case of M/s ENFIELD APPARELS LTD.

Case of M/s ENFIELD APPARELS LTD:

• The NCLT, Kolkata Bench, passed an order on 06/08/2018, initiating the corporate insolvency resolution process, admitting the applicant as the corporate debtor, and appointed Sri Kanchan Duatta as Interim Resolution Professional (IRP).
• The applicant is under liquidation and one of the assets under liquidation is leasehold property, taken on lease for 99 years from the West Bengal Industrial Development Corporation Ltd. The one of the condition of lease was that it can be sub-leased after 5 years from the date of signing of deed after taking approval of the West Bengal Industrial Development Corporation Ltd. on payment of transfer fees i.e. 10% according to prevailing market value of the property as assessed by the Registering Authority of the State Government.
• Now the query arises before the AAR was whether GST is payable on the consideration received on assignment of leasehold right in property to another person and whether ITC can be claimed on transfer fees or not.
• The schedule 2 (para 2) of the CGST Act provides that with respect to transactions relating to land and buildings, any lease, tenancy, easement, license to occupy the land, letting out of a building including a commercial, industrial or residential complex for business or commerce is the supply of services.
• This simply means that benefits arising from land mentioned above will be treated as supply of service for the purpose of GST Act and are not treated as transactions in immovable property.
• Now the query arises that whether the activity of assignment of leasehold right in factory can be considered as sub- leasing so as to attract GST?
• It was observed that the West Bengal Industrial Development Corporation has no title or ownership on immovable property which is central to sale of any immovable property within the meaning of Transfer of Property Act, 1882. The activity of assignment is in the nature of agreeing to transfer one’s leasehold rights which does not amount to further sub-leasing. The observed things are that it does not create any fresh benefit from land other than the leasehold right. This is to considered as compensation for agreeing to do the transfer of rights in favour of the assignee.
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Is GST applicable for assignment of leasehold right in immovable property?

Similar to the terms used in a property buying process, the world of renting is also filled with complex terms of its own. There are two main parties in a lease agreement. A lease is a contractual arrangement where one party, called the lessor, provides an asset for use by the other party, referred to as the lessee, based on periodic payments for an agreed period.

By signing a lease agreement, the owner transfers some right over the immovable property to the tenant (lessee). The tenant is entitled to remain in possession of the premises till the lease agreement is terminated.

A tenant who has taken a building or a floor on rent may be wanting to sub-let part or whole of the rented premises because of various reasons.

This is also known as sub-leasing. Basically, a sublease is created when the renter decides to rent out the apartment he or she is already renting. For example, if you rent your apartment to another person, you’d be creating a sublease.

Let use refer to the AAR ruling of M/s Enfield Apparels Ltd where the issue under consideration before the West Bengal Authority of Advance Ruling (AAR) was whether assignment of sub lease to another party amounts to transfer of the property or not?

Facts of the Case

• The National Company Law Tribunal (NCLT), passed an order, initiating the corporate insolvency resolution process (CIRP), admitting the applicant as the corporate debtor.
• The NCLT appointed an Interim Resolution Professional (IRP) who was subsequently confirmed as the Resolution Professional (RP) by the Committee of Creditors (CoC).
• During the CIRP, the RP and the CoC did not receive any resolution plan. The NCLT, therefore, passed another order to start the process of liquidating the corporate debtor and appointed the IRP as the Liquidator.
• One of the assets under liquidation was the leasehold factory unit along with car parking space (Demised Premises).
• The West Bengal Industrial Development Corporation Ltd (Sub-lessor) granted the applicant possession of the Demised Premises for 99 years under a registered deed of sub-lease on payment of an up-front premium and monthly lease rental.

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• According to the Deed, the applicant, after the expiry of at least 5 years from the date of the Deed coming into force, was entitled to assign to another person the unexpired residual period of the sub-lease after taking written approval of the Sub-lessor and on payment of transfer fee, being 10% of the prevailing market value of the property as assessed by the Registering Authority of the State Government.
• The Liquidator wanted to know whether GST was payable on the consideration receivable on such assignment. If so, what should be the SAC and the rate applicable? He also sought clarity on whether he can claim input tax credit (ITC) for the GST paid on the transfer fee.

Submissions of the Applicant

• The applicant submitted that the leasehold right to immovable property was an immovable property.
• He referred to section 3(26) of the General Clauses Act, 1897, which defined immovable property to include land, benefits to arise out of the land and things attached to the earth, or permanently fastened to anything attached to the earth.
• The phrase ‘benefits to arise out of land’ is relevant. According to the applicant, it means the interest in land. Even the transfer of development rights in the land through joint development is treated as the sale of land.
• The applicant, therefore, concluded that the lease alone should attract levy of GST.
• Assignment of leasehold rights on land, on the other hand, was nothing but the transfer of immovable property similar to the sale of land and buildings
• No GST was leviable on such assignments as it was nothing but a sale of the building.
• Pertaining to the question of admissibility of the ITC, being the GST to be paid on the transfer fee, according to the applicant, such transfer fee was the consideration payable to the Sub-lessor for rendering service in the course or furtherance of business, more specifically because business included in terms of section 2(17)(d) of the GST Act supply or acquisition of goods or services in connection with the closure of a business.
• The applicant, therefore, argued that GST to be paid on such transfer fee was admissible as ITC if it was ruled that the assignment of leasehold right was a supply of taxable service

Submissions of the concerned officer from the revenue

Revenue submitted that the assigning of the sub-lease is a service classifiable under the heading ‘Other Miscellaneous Services’ (SAC 99979) and is to be taxed accordingly.

Observations of the Authority on whether there was any transfer of immovable property

• Section 3(26) of the General Clauses Act, 1897 defines “immovable property” to include land, benefits to arise out of the land, and things attached to the earth, or permanently fastened to anything attached to the earth.
• However, applicability of the General Clauses Act, 1897 in the context of a Special Act like the CGST Act, 2017 was limited to areas where no express provisions were made under the said Special Act.
• Scope of supply under section 7(1) of the GST Act includes all forms of supply of goods and services, including a sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made.
• Section 7(1A) read with Schedule II under the GST Act provides which of such supplies shall be treated as supply of goods or services.
• Paragraph 2 of Schedule II provides that with respect to transactions relating to land and buildings, any lease, tenancy, easement, license to occupy the land, letting out of a building including a commercial, industrial or residential complex for business or commerce is the supply of services.
• In other words, benefits arising from land in the forms specified in paragraph 2 of Schedule II are not to be treated as transactions in immovable property but as the supply of service for the purpose of the GST Act.
• The Deed, therefore, confers upon the applicant no better title to the Demised Premises other than a service contract of lease.
• He can, therefore, transfer to the assignee only his right to receive the service of the lease for the unexpired period after obtaining prior approval of the Sub-lessor on payment of the transfer fee.
• The Deed provides the rights of the Sub-lessee. They include the right to have peaceful possession of the Demised Premises on regular payment of the lease rental and compliance to the conditions and restrictions.
• A reading of the Deed made it clear that the Sub-lessor allowed the applicant, possession of the Demised Premises for the manufacture of garments and textiles.
• The sub-lease may be terminated if the Sub-lessee fails to pay the lease rental or maintenance charges, fails or delays in commencing commercial operation, discontinues the business, fails to maintain good labour practice or breaches any terms of the Deed.
• It was evident that the applicant, apart from the conditional possession of the Demised Premises, enjoyed no ownership, which was central to sale of any immovable property within the meaning of section 54 of the Transfer of Property Act, 1882.
• The applicant’s interest in the benefits arising out of the Demised Premises was limited to sub-leasing in terms of the Deed.
• He was capable of transferring the benefits only to that extent.
• The assignment, therefore, did not amount to transfer of any benefit other than leasehold rights in terms of the Deed for the unexpired period of the lease and there was no transfer of any immovable property in the context of the GST Act.

Observations of the Authority on the classification of the service

• The activity of assignment was in the nature of agreeing to transfer one’s leasehold rights.
• It did not amount to further sub-leasing, as the applicant’s rights as per the Deed extinguished.
• Neither did it create fresh benefit from land other than the leasehold right.
• It was like a compensation for agreeing to transfer the applicant’s rights in favour of the assignee.
• Thus it was a service classifiable under ‘Other miscellaneous service’ (SAC 999792) and taxable @ 18% under Sl No. 35 of Notification No. 11/2017 – CT (Rate) dated 28/06/2017, as amended from time to time.

Observations of the AAR on whether ITC is available or not

• The transfer fee charged by the Sub-lessor was in the nature of a consideration for tolerating an act that the applicant was otherwise refrained from doing in terms of the Deed.
• It was also a service classifiable under ‘Other miscellaneous service’ (SAC 999794) and taxable @ 18% under Sl No. 35 of the Notification No. 11/2017 – CT (Rate) dated 28/06/2017.
• It was the consideration payable to the Sub-lessor for providing a service in the course or furtherance of business, more specifically because business includes supply or acquisition of goods or services in connection with the closure of a business in terms of section 2(17)(d) of the GST Act.
• The GST to be paid on such transfer fee was, therefore, admissible as ITC.

In conclusion,the activity of assignment of leasehold property is in the nature of agreeing to transfer one’s leasehold rights. It does not amount to further sub-leasing, as the applicant’s rights stands extinguished after assignment. Neither does it create fresh benefit from the land. It is in the nature of compensation for agreeing to do the transfer of the applicant’s rights in favour of the assignee.

It is a service classifiable under ‘Other miscellaneous service’ (SAC 999792) and taxable @ 18%. The transfer fee charged by the Sub-lessor is the consideration payable to the Sublessor for providing a service in the course or furtherance of business, and the GST to be paid on such transfer fee is, therefore, admissible as ITC.

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Assignment of Lease

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What is an assignment of lease.

The assignment of lease is a title document that transfers all rights possessed by a lessee or tenant to a property to another party. The assignee takes the assignor’s place in the landlord-tenant relationship.

You can view an example of a lease assignment here .

How Lease Assignment Works

In cases where a tenant wants to or needs to get out of their lease before it expires, lease assignment provides a legal option to assign or transfer rights of the lease to someone else. For instance, if in a commercial lease a business leases a place for 12 months but the business moves or shuts down after 10 months, the person can transfer the lease to someone else through an assignment of the lease. In this case, they will not have to pay rent for the last two months as the new assigned tenant will be responsible for that.

However, before the original tenant can be released of any responsibilities associated with the lease, other requirements need to be satisfied. The landlord needs to consent to the lease transfer through a “License to Assign” document. It is crucial to complete this document before moving on to the assignment of lease as the landlord may refuse to approve the assignment.

Difference Between Assignment of Lease and Subletting

A transfer of the remaining interest in a lease, also known as assignment, is possible when implied rights to assign exist. Some leases do not allow assignment or sharing of possessions or property under a lease. An assignment ensures the complete transfer of the rights to the property from one tenant to another.

The assignor is no longer responsible for rent or utilities and other costs that they might have had under the lease. Here, the assignee becomes the tenant and takes over all responsibilities such as rent. However, unless the assignee is released of all liabilities by the landlord, they remain responsible if the new tenant defaults.

A sublease is a new lease agreement between the tenant (or the sublessor) and a third-party (or the sublessee) for a portion of the lease. The original lease agreement between the landlord and the sublessor (or original tenant) still remains in place. The original tenant still remains responsible for all duties set under the lease.

Here are some key differences between subletting and assigning a lease:

• Under a sublease, the original lease agreement still remains in place.
• The original tenant retains all responsibilities under a sublease agreement.
• A sublease can be for less than all of the property, such as for a room, general area, portion of the leased premises, etc.
• Subleasing can be for a portion of the lease term. For instance, a tenant can sublease the property for a month and then retain it after the third-party completes their month-long sublet.
• Since the sublease agreement is between the tenant and the third-party, rent is often negotiable, based on the term of the sublease and other circumstances.
• The third-party in a sublease agreement does not have a direct relationship with the landlord.
• The subtenant will need to seek consent of both the tenant and the landlord to make any repairs or changes to the property during their sublease.

Here is more on an assignment of lease here .

Benjamin W.

Parties involved in lease assignment.

There are three parties involved in a lease assignment – the landlord or owner of the property, the assignor and the assignee. The original lease agreement is between the landlord and the tenant, or the assignor. The lease agreement outlines the duties and responsibilities of both parties when it comes to renting the property. Now, when the tenant decides to assign the lease to a third-party, the third-party is known as the assignee. The assignee takes on the responsibilities laid under the original lease agreement between the assignor and the landlord. The landlord must consent to the assignment of the lease prior to the assignment.

For example, Jake is renting a commercial property for his business from Paul for two years beginning January 2013 up until January 2015. In January 2014, Jake suffers a financial crisis and has to close down his business to move to a different city. Jake doesn’t want to continue paying rent on the property as he will not be using it for a year left of the lease. Jake’s friend, John would soon be turning his digital business into a brick-and-mortar store. John has been looking for a space to kick start his venture. Jake can assign his space for the rest of the lease term to John through an assignment of lease. Jake will need to seek the approval of his landlord and then begin the assignment process. Here, Jake will be the assignor who transfers all his lease related duties and responsibilities to John, who will be the assignee.

You can read more on lease agreements here .

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Assignment of Lease From Seller to Buyer

In case of a residential property, a landlord can assign his leases to the new buyer of the building. The landlord will assign the right to collect rent to the buyer. This will allow the buyer to collect any and all rent from existing tenants in that property. This assignment can also include the assignment of security deposits, if the parties agree to it. This type of assignment provides protection to the buyer so they can collect rent on the property.

The assignment of a lease from the seller to a buyer also requires that all tenants are made aware of the sale of the property. The buyer-seller should give proper notice to the tenants along with a notice of assignment of lease signed by both the buyer and the seller. Tenants should also be informed about the contact information of the new landlord and the payment methods to be used to pay rent to the new landlord.

You can read more on buyer-seller lease assignments here .

Get Help with an Assignment of Lease

Do you have any questions about a lease assignment and want to speak to an expert? Post a project today on ContractsCounsel and receive bids from real estate lawyers who specialize in lease assignment.

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George Oggero is a down-to-earth lawyer who understands that his clients are human beings. He is a lifelong Houston resident. He graduated from St. Thomas High School and then Texas A&M University. He obtained his Doctor of Jurisprudence from South Texas College of Law in 2007. He is experienced in real estate, criminal defense, civil/commercial matters, personal, injury, business matters, general counsel on-demand, and litigation.

Michael has extensive experience advising companies from start-ups to established publicly-traded companies . He has represented businesses in a wide array of fields IT consulting, software solutions, web design/ development, financial services, SaaS, data storage, and others. Areas of expertise include contract drafting and negotiation, terms of use, business structuring and funding, company and employee policies, general transactional issues as well as licensing and regulatory compliance. His prior experience before entering private practice includes negotiating sales contracts for a Fortune 500 healthcare company, as well as regulatory compliance contracts for a publicly traded dental manufacturer. Mr. Brennan firmly believes that every business deserves a lawyer that is both responsive and dependable, and he strives to provide that type of service to every client.

I am an experienced technology contracts counsel that has worked with companies that are one-person startups, publicly-traded international corporations, and every size in between. I believe legal counsel should act as a seatbelt and an airbag, not a brake pedal!

John Daniel "J.D." Hawke is an experienced attorney with a law practice in Mobile, Alabama. He was born in Fairhope, Alabama and after earning his undergraduate degree at Auburn University, he received a law degree from Thomas Goode Jones School of Law in 2010. After law school, he formed the Law Office of J.D. Hawke LLC and over the last decade he has fought incredibly hard for each and everyone of his clients. His practice focuses on representing people facing criminal charges and clients dealing with family law matters. In addition to criminal defense and domestic relations cases, he also regularly handles contract disputes, personal injury cases, small business issues, landlord/tenant disputes, document drafting, and estate planning. He is licensed to practice law in the State of Alabama and the United States District Court for the Southern District of Alabama.

Thomas Codevilla is Partner at SK&S Law Group where he focuses on Data Privacy, Security, Commercial Contracts, Corporate Finance, and Intellectual Property. Read more at Skandslegal.com Thomas’s clients range from startups to large enterprises. He specializes in working with businesses to build risk-based data privacy and security systems from the ground up. He has deep experience in GDPR, CCPA, COPPA, FERPA, CALOPPA, and other state privacy laws. He holds the CIPP/US and CIPP/E designations from the International Association of Privacy Professionals. Alongside his privacy practice he brings a decade of public and private transactional experience, including formations, financings, M&A, corporate governance, securities, intellectual property licensing, manufacturing, regulatory compliance, international distribution, China contracts, and software-as-a-service agreements.

Attorney of 6 years with experience evaluating and drafting contracts, formation document, and policies and procedures in multiple industries. Expanded to estate planning last year.

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Contract to lease land from a church.

I’m planning on leasing land from a church. Putting a gym on the property. And leasing it back to the school.

Ok; first step is that you will need a leasing contract with the church. Ask them to prepare one for you so you would just need an attorney to review the agreement and that should cost less than if you had to be the party to pay a lawyer to draft it from scratch. You need to ensure that the purpose of the lease is clearly stated - that you plan to put a gym on the land so that there are no issues if the church leadership changes. Step 2 - you will need a lease agreement with the school that your leasing it do (hopefully one that is similar to the original one your received from the church). Again, please ensure that all the terms that you discuss and agree to are in the document; including length of time, price and how to resolve disputes if you have one. I hope this is helpful. If you would like me to assist you further, you can contact me on Contracts Counsel and we can discuss a fee for my services. Regards, Donya Ramsay (Gordon)

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Proposed GST/HST Treatment of Assignment Sales

GST/HST Notices - Notice 323 May 2022

On April 7, 2022, the Minister of Finance Canada tabled Budget 2022 which proposed an amendment to Part IX of the Excise Tax Act. The proposed amendment would make all assignment sales in respect of a newly constructed or substantially renovated single unit residential complex or residential condominium unit taxable.

This publication provides questions and answers regarding the proposed amendment. Any commentary in this publication should not be taken as a statement by the Canada Revenue Agency that the proposed amendment will become law in its current form.

Except as otherwise noted, all statutory references in this publication are to the provisions of the Excise Tax Act (ETA). The information in this publication does not replace the law found in the ETA and its regulations.

If this information does not completely address your particular situation, you may wish to refer to the ETA or relevant regulation, or call GST/HST Rulings at 1‑800‑959‑8287 for additional information. If you require certainty with respect to any particular GST/HST matter, you may request a ruling. GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service , explains how to obtain a ruling or an interpretation and lists the GST/HST rulings centres.

If you are located in Quebec and wish to request a ruling related to the GST/HST, please call Revenu Québec at 1‑800‑567‑4692. You may also visit the Revenu Québec website at revenuquebec.ca to obtain general information.

For listed financial institutions that are selected listed financial institutions (SLFIs) for GST/HST or Quebec sales tax (QST) purposes or both, whether or not they are located in Quebec, the CRA administers the GST/HST and the QST. If you wish to make a technical GST/HST or QST enquiry related to SLFIs, please call 1‑855‑666‑5166.

GST/HST rates

Reference in this publication is made to supplies that are subject to the GST or the HST. The HST applies in the participating provinces at the following rates: 13% in Ontario and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%. If you are uncertain as to whether a supply is made in a participating province, refer to GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province .

Table of Contents

Proposed amendment, definitions, questions and answers.

An assignment sale in respect of residential housing is a transaction in which a purchaser (an assignor) that has entered into an agreement of purchase and sale with a builder of a new house sells (assigns) their rights and obligations under the agreement of purchase and sale to another person (an assignee). The agreement that details the terms of the assignment of an agreement of purchase and sale (the assignment sale) is generally referred to as the assignment agreement.

For purposes of this notice, a house includes a detached or semi-detached house, a duplex, a condominium unit, a townhouse, a unit in a co-operative housing corporation, a mobile home (including a modular home) and a floating home.

Under the current GST/HST rules, an assignment sale made by a person that is not an individual in respect of newly constructed or substantially renovated residential housing is generally taxable, whereas an assignment sale made by an individual may be either taxable or exempt. An assignment sale made by an individual is generally taxable if the individual had originally entered into the agreement of purchase and sale with the builder for the primary purpose of selling their interest in the real property. If, on the other hand, the individual had originally entered into the agreement of purchase and sale for another primary purpose (for example, to occupy the house as a place of residence), the assignment sale is generally exempt. Any amount an assignor paid as a deposit to a builder is included in the consideration for a taxable assignment sale. For more information on the current GST/HST rules, refer to GST/HST Info Sheet GI-120, Assignment of a Purchase and Sale Agreement for a New House or Condominium Unit .

The proposed amendment to the ETA would make all assignment sales, including those made by individuals, in respect of newly constructed or substantially renovated residential housing taxable for GST/HST purposes. Furthermore, the proposed amendment would exclude any amount attributable to a deposit paid by an assignor to a builder from the consideration for a taxable assignment sale, when certain conditions are met. The proposed amendment would apply to all assignment agreements entered into after May 6, 2022.

The proposed amendment adds section 192.1 to the ETA. Proposed section 192.1 states that if a taxable supply by way of sale of a single unit residential complex (as defined in subsection 254(1)) or of a residential condominium unit is made in Canada under an agreement of purchase and sale (in this section, referred to as the purchase agreement) entered into with a builder of the single unit residential complex or of the residential condominium unit and if another supply by way of assignment of the purchase agreement is made by a person (other than the builder) under another agreement, then the following rules apply:

• the other supply is deemed to be a taxable supply, by way of sale, of real property that is an interest in the single unit residential complex or residential condominium unit
• the consideration for the other supply is deemed to be equal to the amount determined by the formula:

Proposed section 192.1 applies in respect of any supply by way of assignment of an agreement of purchase and sale if the supply is made after May 6, 2022.

Proposed section 192.1 applies to a single unit residential complex or a residential condominium unit.

Single unit residential complex means a residential complex that does not contain more than one residential unit, but does not include a residential condominium unit.

For the purposes of the proposed amendment, a single unit residential complex also includes:

• a multiple unit residential complex that does not contain more than two residential units (for example, a duplex)
• any other multiple unit residential complex if it is described by paragraph (c) of the definition of residential complex in subsection 123(1) and contains one or more residential units that are for supply as rooms in a hotel, motel, inn, boarding house, lodging house or similar premises and that would be excluded from being part of the residential complex if the complex were a residential complex not described by that paragraph (for example, a bed and breakfast establishment)

Residential condominium unit means a residential complex that is, or is intended to be, a bounded space in a building designated or described as a separate unit on a registered condominium or strata lot plan or description, or a similar plan or description registered under the laws of a province, and includes any interest in land pertaining to ownership of the unit.

1. I am an individual who entered into an assignment agreement before May 7, 2022. Is the assignment sale taxable?

If an assignment agreement is entered into before May 7, 2022, the current GST/HST rules apply. This means that the assignment sale may be either taxable or exempt. An assignment sale made by an individual is generally taxable if the individual had originally entered into the agreement of purchase and sale with the builder for the primary purpose of selling their interest in the real property. If, on the other hand, the individual had originally entered into the agreement of purchase and sale for another primary purpose (for example, to occupy the property as a place of residence), the assignment sale is generally exempt.

Under the current GST/HST rules, if an assignor’s sale of their interest in the real property to an assignee is taxable, the total amount payable for the sale of the interest is subject to the GST/HST, including any amount the assignor paid as a deposit to the builder, whether or not such an amount is separately identified.

For more information, refer to GST/HST Info Sheet GI-120 .

2. The assignor already paid a deposit under the purchase and sale agreement. Is the portion of the assignment sale that is attributable to the deposit taxable?

Typically, the consideration for an assignment sale includes an amount attributable to a deposit that had previously been paid to the builder by the assignor. The application of the GST/HST to the amount attributable to the deposit in the context of the assignment sale depends on the date the assignment agreement was entered into and not on the date the deposit was paid to the builder.

Where an assignment agreement is entered into before May 7, 2022, and the assignment sale is taxable, the total amount payable for the sale of the assignor’s interest to the assignee is subject to the GST/HST, including any amount the assignor paid as a deposit to the builder, whether or not such an amount is separately identified.

Where an assignment agreement is entered into on or after May 7, 2022, and the assignment agreement indicates in writing that a part of the consideration is attributable to the reimbursement of a deposit paid by the assignor to the builder under the purchase and sale agreement, the proposed amendment excludes the amount attributable to the deposit from the consideration for a taxable assignment sale.

3. Who is responsible for remitting the tax on the assignment sale under the proposed amendment?

The proposed amendment does not change who is responsible for remitting the tax on the assignment sale. The assignor in respect of a taxable assignment sale would generally continue to be responsible for collecting the GST/HST and remitting the tax to the Canada Revenue Agency (CRA). Where the assignor is a non-resident of Canada, the assignee would continue to be required to self-assess and pay the GST/HST directly to the CRA.

For more information, refer to Guide RC4022, General Information for GST/HST Registrants .

4. Will the proposed amendment affect the new housing rebate?

The amount of a new housing rebate under the GST/HST legislation is determined based, in part, on the total tax paid and the total consideration for a taxable supply of a house, which includes any other taxable supply of an interest in the house (for example, the tax and consideration paid by an assignee for a taxable assignment sale). As a result of the proposed amendment, where an assignment agreement is entered into after May 6, 2022, the GST/HST applies to assignment sales that were not otherwise taxable, and the amount attributable to a deposit is excluded from the consideration for all taxable assignment sales. Consequently, the proposed amendment may have an impact on both the total tax paid and the total consideration for the taxable supply of a new house, which may affect the amount of a GST/HST new housing rebate in respect of the GST or the federal part of the HST, or of a new housing rebate in respect of the provincial part of the HST, that may be available in respect of a new house.

Only one new housing rebate application can be made for each new house. Therefore, an assignee purchaser cannot submit a rebate application through a builder (Builder A) for the tax paid to Builder A on the purchase of the house and submit a second rebate application for the tax paid to the assignor on the purchase of the interest in the house. In such cases, the assignee purchaser may want to file their new housing rebate application directly with the CRA rather than through Builder A. In this way, the assignee purchaser can include in the new housing rebate application the tax paid to Builder A and the tax paid to the assignor in determining the amount of their GST/HST new housing rebate and, where applicable, a provincial new housing rebate.

For more information, refer to Guide RC4028, GST/HST New Housing Rebate .

5. Will the proposed amendment affect the new residential rental property rebate?

The amount of a new residential rental property rebate (NRRPR) under the GST/HST legislation is determined based, in part, on the total tax payable in respect of a residential complex and the fair market value of the qualifying residential unit that forms part of the complex at the time the GST/HST becomes payable on the purchase of the complex. As a result of the proposed amendment, where an assignment agreement is entered into after May 6, 2022, the GST/HST applies to assignment sales that were not otherwise taxable, and the amount attributable to a deposit is excluded from the consideration for all taxable assignment sales. Consequently, the proposed amendment may have an impact on the total tax payable in respect of the complex, which may affect the amount of a GST/HST NRRPR in respect of the GST or the federal part of the HST, or of an NRRPR in respect of the provincial part of the HST.

For more information, refer to Guide RC4231, GST/HST New Residential Rental Property Rebate .

Further information

All GST/HST technical publications are available at GST/HST technical information .

To make a GST/HST enquiry by telephone :

• for GST/HST general enquiries, call Business Enquiries at 1‑800‑959‑5525
• for GST/HST technical enquiries, call GST/HST Rulings at 1‑800‑959‑8287

If you are located in Quebec , call Revenu Québec at 1‑800‑567‑4692 or visit their website at revenuquebec.ca .

If you are a selected listed financial institution (whether or not you are located in Quebec) and require information on the GST/HST or the QST , go to GST/HST and QST - Financial institutions, including selected listed financial institutions or:

• for general GST/HST or QST enquiries , call Business Enquiries at 1‑800‑959‑5525
• for technical GST/HST or QST enquiries , call GST/HST Rulings SLFI at 1‑855‑666‑5166

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• High Courts
• Gujarat High Court
• Gujarat High Court Stays...

Gujarat High Court Stays Proceedings Concerning GST Imposition On Transfer Of Leasehold Rights Of GIDC Land

Mariya paliwala.

22 Oct 2023 10:17 AM GMT

The Gujarat High Court stayed the proceedings in respect of the issue related to the imposition of GST on the transfer of leasehold rights to Gujarat Industrial Development Corporation (GIDC) land and issued the notice to the department.The bench of Justice Biren Vaishnav and Justice Mauna M. Bhatt passed this order while presiding over a petition in respect of several notices that had...

The Gujarat High Court stayed the proceedings in respect of the issue related to the imposition of GST on the transfer of leasehold rights to Gujarat Industrial Development Corporation (GIDC) land and issued the notice to the department.

The bench of Justice Biren Vaishnav and Justice Mauna M. Bhatt passed this order while presiding over a petition in respect of several notices that had been issued by the state GST offices across Gujarat in the controversial matter of imposing GST on the transfer of leasehold rights of GIDC land by private parties.

A large number of MSMEs across Gujarat operate from GIDC and, to date, have benefited from the infrastructural platform provided by GIDC in the form of concessional rate land on a 99-year lease.

The state GST officials are keen on issuing summons, notices, and advisories to cover such long-term lease transfers between private parties under the purview of GST. In most cases, taxing such transactions has resulted in the unsettling of already-closed accounts with the purchaser, even after a lapse of 5 to 6 years. This is a genuine hardship on the part of MSME, who may have invested the proceeds of the transfer and moved on.

The petitioner contended that, in accordance with Schedule-II of the Central Goods and Service Tax Act, 2017, which deals with activities to be treated as a supply of goods and supply of services, any lease, tenancy, easement, or license to occupy land is a supply of services and would therefore come under the purview of the CGST Act. However, what is actually being taxed in the hands of the petitioner is the sale of land, which otherwise is an activity not falling within the supply of services in accordance with Schedule III of the GST Act.

The court, while listing the matter on December 7, 2023, granted interim relief in the form of a stay.

Counsel For Petitioner: Avinash Poddar

Counsel For Respondent: None

Case Title: Suyog Dye Chemie Pvt Ltd Versus Union Of India

LL Citation: 2023 LiveLaw (Guj) 169

Case No.: R/SPECIAL CIVIL APPLICATION NO. 17792 of 2023

Click Here To Read The Order