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The Nagpur bench of the Bombay High Court clarified that transferring industrial plots originally allotted by the Maharashtra Industries Development Corporation (MIDC) to third parties does not attract GST. The court followed a precedent from the Gujarat High Court, which had applied a 2017 central tax notification allowing a nil GST rate on long-term lease charges by state industrial development corporations. The ruling provides relief to businesses that had received GST recovery notices, ending confusion over tax liability on such plot transfers and ensuring consistent treatment of lease assignments in industrial zones.
The Nagpur bench of the Bombay High Court has confirmed that transferring MIDC industrial plots initially allotted by the state corporation to third parties does not attract Goods and Services Tax (GST). This judgment aligns with an earlier ruling by the Gujarat High Court regarding transfers of plots allotted by the Gujarat Industries Development Corporation (GIDC). The Gujarat court had interpreted a 2017 central tax notification to apply a zero GST rate on one-time charges for long-term leases by state industrial development corporations, and held that the nil rate applies even when the original lessee assigns the lease to another party. Advertisement
The decision comes after a number of businesses in Maharashtra received GST recovery notices following the assignment of their MIDC leasehold rights. Authorities had considered such transfers as taxable supplies and sought GST based on the total consideration paid for the plot rights. Many plot holders had assumed that the exemption under the 2017 notification applied, given the long-term nature of leases and how similar assignments are treated for stamp duty and other statutory charges.
In a highlighted case, Aerocom Cushions Private Ltd received a GST notice after acquiring a plot originally allotted to Rishita Industries. The court ruled that transfers under proper MIDC permissions are effectively transfers of immovable property rights and therefore fall outside the scope of GST. The Chamber of Small Industries Association (COSIA) welcomed the judgment, saying it resolves long-standing ambiguity and prevents undue tax burdens on genuine business transactions.
Industry representatives had consistently argued that treating such assignments as taxable leases at an 18% GST rate would impose substantial costs. COSIA noted that since no input tax credit is available in these cases and MIDC itself treats transfers differently for statutory purposes, such transactions should not be taxed. With the High Court's decision, GST authorities are now constrained from treating these assignments as taxable supplies.
The court's reliance on the Gujarat High Court precedent and the central tax notification reinforces consistency in interpretation. Businesses holding MIDC plots now have clarity and can manage their transactions without facing unexpected GST liabilities. The judgment ensures that assignment of long-term leasehold rights is treated similarly to a transfer of immovable property, which is outside GST scope, providing much-needed legal certainty for industrial landholders.
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