The Supreme Court dismissed the Revenue’s Special Leave Petition and declined to interfere with the judgment of the Bombay High Court. Consequently, the view taken by the High Court that transfer of leasehold rights in industrial land, by way of outright assignment, does not attract GST in the facts of the case, was allowed to stand.

The Court accepted the principle that where the original lessee transfers its entire leasehold rights to another party with the approval of the competent authority and after payment of the applicable premium, the transaction assumes the character of transfer of immovable property rights rather than a taxable supply of service.

A crucial aspect considered by the Court was the requirement under Section 7 of the CGST Act that a transaction must be undertaken “in the course or furtherance of business” in order to qualify as a taxable supply. During the hearing, the Court sought clarification from the Revenue regarding the nexus between the assignment of leasehold rights and any continuing business activity. The Revenue failed to satisfactorily establish how such assignment constituted a business activity attracting GST.

In absence of a demonstrable connection with “business”, the Court found no reason to interfere with the High Court’s conclusion that the transaction fell outside the scope of taxable supply under GST law.

The Supreme Court also rejected the Revenue’s argument that similar issues were pending before other High Courts, including proceedings before the Gujarat High Court, observing that GST disputes are required to be examined on their own factual and legal matrix and cannot be decided merely because analogous matters are pending elsewhere.

The Final Copy of this judgment is awaited.