GST on Assignment of Leasehold Right: Aerocom offers relief, but the story is not over yet

We are pleased to share that our Partner Gourav Sogani, and Associate Vidhi Jain, have co-authored an article titled ‘𝗚𝗦𝗧 𝗼𝗻 𝗔𝘀𝘀𝗶𝗴𝗻𝗺𝗲𝗻𝘁 𝗼𝗳 𝗟𝗲𝗮𝘀𝗲𝗵𝗼𝗹𝗱 𝗥𝗶𝗴𝗵𝘁𝘀: 𝗔𝗲𝗿𝗼𝗰𝗼𝗺 𝗼𝗳𝗳𝗲𝗿𝘀 𝗿𝗲𝗹𝗶𝗲𝗳, 𝗯𝘂𝘁 𝘁𝗵𝗲 𝘀𝘁𝗼𝗿𝘆 𝗶𝘀 𝗻𝗼𝘁 𝗼𝘃𝗲𝗿 𝘆𝗲𝘁’, published in Taxmann.

The article examines the evolving GST position on assignment of long-term leasehold rights in land allotted by State Industrial Development Corporations such as MIDC and GIDC. The issue has assumed significance in recent years, with the Revenue seeking to treat such assignments as taxable supplies of service, often resulting in substantial GST exposure.

The article analyses the central question of whether an assignment of leasehold rights should be regarded as a taxable supply under the CGST Act, or as a transfer of benefits arising out of immovable property, thereby falling outside the ambit of GST. In this context, the authors discuss the rulings of the Gujarat High Court in Gujarat Chamber of Commerce and Industry and the Bombay High Court in Aerocom Cushions, along with the Supreme Court’s decision in the latter.

While these decisions provide much-needed relief to businesses operating from long-term leasehold land, the issue continues to remain one to watch closely, particularly with the challenge in Gujarat Chamber of Commerce and Industry pending before the Supreme Court.

Read the article here