The assignment of leasehold rights under the GST regime is deemed a transfer of immovable property, exempt from GST, contradicting the previous classification as a supply of service.

JUDGMENT :

PRANAV TRIVEDI, J.

1. Heard learned advocate Mr. Hardik Vora for the petitioner and learned Assistant Government Pleader Ms. Shrunjal Shah for the respondent.

2. Having regard to the controversy arising in the petition which is in narrow compass, with the consent of the learned advocates for the respective parties, the matter is taken up for hearing.

3. Present petition preferred under Articles 226 and 227 of the Constitution of India assails the correctness and validity of Order-in-Original dated 31.12.2024 rendered under Section 7 4 (1) of the Gujarat/State Goods & Service Tax Act, 2017 (hereinafter referred to as ‘the Act’ for short). The impugned order passed in FORM GST DRC-07 inter alia considers the assignment of lease hold rights by the petitioner in favour of M/s. Bansi Industries as supply of service under Section 7 (1)(a) of the Act and, therefore, classified under Heading 9972 of classification scheme for services under the Act.

4. Brief facts leading to filing of the present petition is that Gujarat Industrial Development Corporation (hereinafter referred to as ‘GIDC’), which is established under the Gujarat Industrial Development Act, 1962, acts as a nodal agency of Government of Gujarat for the purpose of development of industrial areas/estates. GIDC gives lands to industries on lease, generally for a period of 99 years. GIDC issues an allotment letter to the industry desiring to take plots developed by the GIDC. Allotment letter would set various terms and conditions on which the allotment is being made, including the method and manner in which premium is required to be paid.

4.1 It is the case of the petitioner that the petitioner was allotted Industrial Plot No. 227 at Panoli Industrial Estate admeasuring 3596.74 sq.mtrs vide order dated 10.08.2018, which initially consisted of partners namely Bipinbhai Pravinbhai Kakadiya, Dineshbhai Muljibhai Kakadiya, and Hiteshbhai Natvarbhai Kakadiya. Thereafter on account of change in the constitution of the firm, to reflect the change in the records of GIDC, the petitioner applied for the transfer of the plot in the name of petitioner firm with new partners and executed a deed of assignment on 28.06.2018.

4.2. In view of the aforesaid development, on 26.07.2024, the respondent issued an intimation of tax ascertained as being payable under Section 74 (5) of the Act in Form DRC-01A asking the petitioner to pay GST at the rate of 18% of Rs.57,54,800/- being the amount received by the petitioner as consideration for transfer of aforesaid plots to M/s. Bansi Industries along with interest and penalty. In response to the same, the petitioner filed objections on 02.08.2024. However, without considering the same, the respondent issued show cause notice under Section 74 (1) of the Act in Form DRC-01 on 03.08.2024 asking the petitioner to show cause as to why GST amounting to Rs.10,35,864/- should not be demanded and recovered along with interest and penalty on the consideration received by the petitioner on transfer of leasehold rights of GIDC plot in question.

4.3. Being aggrieved by the said show cause notice, the petitioner preferred writ petition being Special Civil Application No. 12828 of 2024 on 20.08.2024, which came to be decided on 03.01.2025. It is the case of the petitioner that pending the writ petition, the respondent without considering the request or providing any opportunity of hearing, passed an order under Section 74 of the GST Act on 31.12.2024 along with Form GST DRC-07 determining total demand of Rs.32,37,458/- including interest and penalty. However, despite the fact that the show cause notice was challenged