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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, PRANAV TRIVEDI, JJ.
Dhiraj Can Co. Pvt. Ltd. - Appellant
Versus
The Union Of India & Ors. - Respondent
Special Civil Application No. 3596 Of 2025
Decided On : 04-07-2025
Key Points: - The assignment/transfer of long-term leasehold rights in GIDC plots is deemed to be transfer of immovable property and exempt from GST, not a supply of services. (!) (!) (!) - The petition succeeds; the show-cause notice and GST liability order regarding transfer of leasehold rights are quashed. (!) (!) (!) - Clause 5 of Schedule III and section 7(1)(a) of the GST Act do not apply to the transaction of assignment/transfer of leasehold rights, as it constitutes transfer of immovable property. (!) (!)
ORDER :
(PER : HONOURABLE MR. JUSTICE PRANAV TRIVEDI)
1 The present petition preferred under Articles 226 and 227 of the Constitution of India assails the correctness and validity of order dated 29.08.2024 under Sec.73 of the State Goods & Service Tax Act (hereinafter referred to as ‘the Act’ for short), whereby, respondent No.4 (hereinafter referred to as ‘the respondent’ for short) has confirmed liability considering the assignment of lease hold rights by the petitioner in favour of M/s. Acquire Chemicals as supply of service u/s. 1-1(A) 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. 7901/1-2B admeasuring 2687.54 sq.mtrs vide Office Order dated 13.10.1982. The Lease Deed/ Conveyance Deed was executed on 25.10.1982. The petitioner had applied to GIDC for transfer of the plot in question to one M/s. Acquire Chemicals vide application dated 03.03.2020. The application was allowed and an approval was granted vide order dated 16.03.2020.
2.2 Subsequent to the order dated 16.03.2020, the petitioner and M/s. Acquire Chemicals executed a Deed of Assignment on 30.06.2020, pursuant to which the petitioner received consideration of Rs.75 lakhs in the year 2019-2020.
2.3 It is the case of the petitioner that it has neither charged nor recovered any GST from M/s. Acquire Chemicals for the consideration paid to the petitioner under Deed of Assignment dated 16.03.2020. However, petitioner was served with summons dated 24.05.2021 under Sec.17(1) of the Act. Thereafter, the petitioner was served with a show-cause notice in FORM DRC-01 on 30.05.2024 which inter alia demanded Rs.13,50,000/- as GST on transfer of lease hold rights in favour of M/s. Acquire Chemicals 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 29.08.2024 which inter alia confirmed the proposal made in show-cause notice dated 30.05.2024. The show-cause notice as well as the order dated 29.08.2024 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 this 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
Transfer of leasehold rights constitutes a sale of immovable property and is not considered a supply of services under the GST Act.
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.
The assignment and sale of leasehold rights are classified as transfer of immovable property, not taxable as supply of services under GST.
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.
The assignment of leasehold rights does not qualify as a supply of services under the Central Goods and Services Tax Act, 2017 and is thus not subject to GST.
The assignment of leasehold rights does not constitute a supply under GST, and any notice issued beyond the limitation period is illegal.
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