[BREAKING] Bombay HC quashes GST on Leasehold Rights, directs to Consider Gujarat HC decision while Remanding Matter [Read Order]

The issue involved was whether the GST Authorities can levy GST on a Deed of Assignment under which the land and the building constructed thereon is transferred by a Lessee to the 3rd party.

According to the Petitioner the transaction in question would fall within Item 5 of Schedule III of the Central Goods and Services Tax Act, 2017 and not under Item 2 of Schedule II of the same Act. This was a contention that was in fact raised in the reply to the show cause notice but the same has not been dealt with at all in the impugned order passed on 19th August 2024.

Considering these facts, the Bombay High Court expressed the opinion that without going into the merits of the matter it would be in the fitness of things if the impugned order is set aside and the matter is remanded back to Respondent No.3 for a fresh adjudication on the show cause notice.

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It was observed that the impugned order also clearly records that no submissions have been made by the Petitioner against the show cause notice and which is factually incorrect.

It was noted that, “There was a reply to the show cause notice filed by the Petitioner dated 22nd July 2024 and which was received by the Assistant Commissioner of State Tax on the very same day. Despite this, the impugned order records that no submissions were made in reply to the show cause notice.”

It was also observed that, “We are informed that after the passing of the impugned order, the Gujarat High Court has in fact taken a view that transactions like the one which forms the subject matter of the show cause notice are not amenable to tax under the GST law. We have not examined the aforesaid judgment. However, it is needless to clarify that the 3rd Respondent shall also take into consideration and deal with the aforesaid decision of the Gujarat High Court whilst rendering its findings on the show cause notice.”

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It is to be made clear that the Bombay High Court has not commented on or examined the aforesaid judgment of the Gujarat High Court and the quashing and remanding of the order demanding Goods and Services Tax (GST) is based on the violation of natural justice.

Read More: GST not leviable on Assignment/Transfer of Leasehold Rights to third party: Gujarat HC

The Gujarat High Court in the earlier ruling had held that Goods and Service Tax (GST) is not leviable on assignment/transfer of leasehold rights to third parties. The bench also quashed  the notices issued by the GST department that sought to recover tax on the transfer of GIDC plots to third parties from their original allottees.

To Read the full text of the Order CLICK HERE

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