Transfer of leasehold rights constitutes transfer of immovable property and is not subject to GST, as clarified under the State Goods and Service Tax Act, 2017.

ORDER :

PRANAV TRIVEDI, J.

1 The present petition preferred under Articles 226 and 227 of the Constitution of India assails the correctness and validity of order dated 05.02.2024 rendered under Sec.74 of the State Goods & Service Tax Act, 2017 (hereinafter referred to as ‘the Act’ for short), with FORM GST DRC-07 inter alia considering the assignment of lease hold rights by the petitioner in favour of M/s.Jay Chemical Industries Limited as supply of service under Sec.7(1A)of the Act and classified under heading 9972.

2 The 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 days. 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.

2.1 The petitioner was allotted industrial plot No. C-292 admeasuring 21591.86 sq.mtrs vide its Office-cum-Allotment Order dated 30.03.2015. The petitioner had applied to GIDC for transfer of the plot in question to one M/s. Jay Chemical Industries, which was granted vide order dated 02.11.2017.

2.2 Subsequent to the order dated 02.11.2017, the petitioner and M/s. Jay Chemical Industries executed an Agreement for Sale Deed dated 30.08.2017, pursuant to which the petitioner received consideration of Rs.4.26 crore in the year 2017-18.

2.3 It is the case of the petitioner that it has neither charged nor recovered any GST from M/s. Jay Chemical Industries for the consideration paid to the petitioner under Agreement to Sale dated 30.08.2017. However, petitioner was served with summons dated 28.09.2022 under Sec.17(1) of the Act. Thereafter, the petitioner was served with a show-cause notice in FORM DRC-01 on 26.07.2024 which inter alia demanded Rs.76,68,000/- as GST on transfer of lease hold rights in favour of M/s. Jay Chemicals Industries on the premise that execution deed and subsequent lease is considered as a taxable value of supply of services.

2.4 Subsequent to the show-cause notice, the petitioner was served with order in FORM GST DRC-07 on 05.02.2025 which inter alia confirmed the proposal made in show-cause notice dated 26.07.2024. The show-cause notice as well as the order dated 05.02.2025 are subject matter of challenge of the present writ petition.

3 Mr.Dhaval Shah, learned advocate for the petitioner has submitted that the issue is no more res integra pursuant to the decision of the Hon’ble Supreme Court in the case of Gujarat Chamber of Commerce, Industries & Ors Vs. Union of India & Ors., rendered in Special Civil Application No. 11345 of 2023.

4 Ms.Shrunjal Shah, learned Assistant Government Pleader was unable to controvert the proposition that the issue is now covered by the decision of Gujarat Chamber of Commerce (supra).

5 This Court, in the case of Gujarat Chamber of Commerce (supra), held as under:

“51. This submission seems to be very attractive at the first blush, however, there are two transactions, one when the GIDC allots plot of land along with right to occupy, right to construct, right to possess on long term lease basis, it is nothing but supply of service as right of ownership of plot in question remains with the GIDC which will revert back on expiry of lease period whereas transaction of sale and transfer of leasehold rights by the lessee- assignor in favour of assignee divest lessee-assignor of all the absolute rights in the property. Therefore, interest in the immovable property in form of leasehold rights cannot be said to be different than the immovable property itself. Section 2(119) of the GST Act defines “works contract” being a contract