In a significant judgment, the Bombay High Court in Hindustan Equipment Craft v. Assistant Commissioner of State Tax and Anr. (Writ Petition No. 1257 of 2026) addressed the applicability of Goods and Services Tax (GST) on the assignment of leasehold rights in immovable property. The Court, comprising Justice Anil L. Pansare and Justice Nivedita P. Mehta, delivered its decision on 27 February 2026, quashing the GST demand raised by the tax authorities.
The petitioner, Hindustan Equipment Craft, challenged an order dated 30 December 2025, which arose from a show cause notice alleging non-payment of GST on the transfer of leasehold rights in a plot allotted by MIDC (Maharashtra Industrial Development Corporation). The authorities contended that the assignment of leasehold rights for consideration constituted a supply of services under Section 7(1) read with Schedule II of the Maharashtra Goods and Services Tax Act, 2017, and was taxable at 18% as per Notification No. 11/2017 CT (Rate).
The core issue before the Court was whether the assignment of leasehold rights in an industrial plot, along with the building thereon, amounted to a supply of services liable to GST, or whether it was a transfer of benefits arising from immovable property, outside the scope of GST. The petitioner had held a 95-year lease, and with MIDC’s consent, transferred the leasehold rights to a third party for consideration, paying the requisite premium.
The respondents argued that such a transfer was covered by the definition of ‘supply’ under Section 7 and Schedule II of the Act, specifically as a supply of services. However, the Court noted that the transaction in question was not a lease or sub-lease, but an assignment that extinguished the petitioner’s rights in the property. The authorities had classified the transaction as ‘other miscellaneous services’ under Sr. No. 35 of Notification No. 11/2017, but the Court found this classification inapplicable, observing that the notification’s scope did not extend to assignments of leasehold rights in immovable property.
The Court undertook a detailed analysis of the statutory provisions, emphasizing that for a transaction to be considered a supply of service under the GST Act, it must be in the course or furtherance of business. In this case, the transfer was a one-time transaction with no nexus to the petitioner’s business activities. The Court also referred to the Gujarat High Court’s decision in Gujarat Chamber of Commerce and Industry v. Union of India, which held that the assignment of leasehold rights in industrial plots by a lessee to a third party for consideration constitutes a transfer of benefits arising from immovable property and is not subject to GST.
The Bombay High Court concurred with the Gujarat High Court’s reasoning, highlighting that the law declared by another High Court is binding on authorities in Maharashtra unless overruled by a competent court. The Court concluded that the assignment of leasehold rights in the present case was a transfer of benefits arising from immovable property and did not amount to a supply of services under the GST Act. Consequently, the impugned GST demand was quashed.
The writ petition was allowed, and the order dated 30 December 2025 was set aside. The Court made the rule absolute, clarifying that such assignments are not liable to GST under the current legal framework.
Case Reported at:
Case Name: Hindustan Equipment Craft v. Assistant Commissioner of State Tax and Anr.
Case Citation: (2026) taxcode.in 530 HC
