GST On Leasehold Rights: Taxability Of Grant, Assignment And Transfer Under The GST Regime
Mishra Rudrani Kumari Radheshyam, Research Scholar (Law), Shri Venkateshwara University, Gajraula [U.P.]
Research Supervisor: Dr. Mohammad Haroon, Shri Venkateshwara University, Gajraula [U.P.]
ABSTRACT
The Goods and Services Tax regime has brought within its ambit a wide range of transactions concerning immovable property, including leasing, tenancy, licensing and other arrangements relating to the right to use or occupy land and buildings. However, the question whether every transaction involving leasehold rights constitutes a taxable supply of service has generated considerable litigation. The controversy assumes particular significance in the case of long-term industrial leases granted by State Industrial Development Corporations, where an original lessee subsequently assigns its entire leasehold interest to a third party for consideration. The Gujarat High Court, in Gujarat Chamber of Commerce and Industry v. Union of India, held that an outright assignment of long-term leasehold rights, together with the building standing on the land, constitutes a transfer of benefits arising from immovable property and is not a taxable supply under GST. This position was subsequently followed in Life Sciences Chemicals and by the Bombay High Court in Aerocom Cushions. In 2026, the Supreme Court dismissed the Revenue's challenge to the Gujarat Chamber judgment. This article examines the statutory framework governing leasehold transactions under the CGST Act, the distinction between grant of lease and assignment of leasehold rights, the judicial reasoning adopted by the Courts, and the practical implications for taxpayers. It concludes with certain suggestions for achieving greater certainty in the taxation of transactions involving immovable property.
Keywords: GST; Leasehold Rights; Assignment; Immovable Property; Supply of Services.
