The Chamber of Small Industry Associations (COSIA) welcomes and highlights a significant and far-reaching judgment of the Bombay High Court (Nagpur Bench) dated 9 January 2026, which has categorically held that GST is not leviable on the assignment of long-term leasehold rights in industrial plots
This judgment marks an important milestone in COSIA’s sustained efforts to challenge the unjust GST burden imposed on MSMEs in respect of assignment/transfer of leasehold rights in plots allotted by State Industrial Development Corporations such as MIDC.
Background: COSIA’s Fight Against GST on Lease Assignments
Over the past several years, COSIA has consistently represented before authorities and courts that:
- Assignment of long-term leasehold rights is in substance a transfer of immovable property
- Such transactions are not “supply of services” under Section 7 of the CGST Act
- Levy of GST on these transactions has caused severe financial hardship to MSMEs, discouraging business restructuring, succession, and revival of sick units
COSIA has pursued this issue through representations, legal challenges, and by supporting litigation in various High Courts, including Maharashtra and Gujarat.
Key Findings of the Bombay High Court
In Aerocom Cushions Pvt. Ltd. vs Assistant Commissioner (CGST), the Bombay High Court examined a GST show cause notice demanding tax on assignment of MIDC leasehold rights and held as follows:
- Assignment of leasehold rights is neither a lease nor a sub-lease
- The original lessee’s rights are extinguished, and the assignee steps into the shoes of the lessee
- Such assignment amounts to transfer of benefits arising out of immovable property
- The transaction does not occur in the course or furtherance of business, an essential requirement for “supply” under GST law
- Therefore, GST demand under Section 74 of the CGST Act was held to be illegal
The Court accordingly quashed the GST show cause notice in its entirety
Reliance on Gujarat High Court Judgment
Importantly, the Bombay High Court approved and followed the landmark Gujarat High Court ruling in Gujarat Chamber of Commerce & Industry vs Union of India (2025), which had already held that:
- Assignment of leasehold rights in industrial plots is sale/transfer of immovable property
- Such transactions fall outside the scope of GST
- GST is applicable only on transfer fees charged by the Industrial Development Corporation, not on the assignment consideration between two industrial units
The Bombay High Court further clarified that until a contrary judgment is delivered, the Gujarat High Court ruling is binding on tax authorities, strengthening legal certainty for MSMEs across Maharashtra.
Significance for MSMEs and Industrial Units
This judgment provides:
- Major relief to MSMEs facing GST demands on lease assignments
- Legal clarity on restructuring, sale, succession, and revival of industrial units
- Strong judicial backing against arbitrary GST notices
- A clear distinction between Assignment of leasehold rights (not taxable), and Transfer charges/permission fees collected by MIDC or similar bodies (taxable)
Download the copy of judgment here
