Gujarat HC: Assignment of 99-Year Leasehold Rights is Transfer of Immovable Property; No GST

The Gujarat High Court has passed an important ruling on the issue of whether the Assignment of 99-year Leasehold Rights of a GIDC industrial plot is taxable under Section 7(1)(a) of the Gujarat or State Goods and Services Tax Act, 2017. Read below to know the order passed by the Gujarat High Court on this matter.

M/s. Bansi Industries, the petitioner, was allotted a land in Panoli Industrial Estate by GIDC (Gujarat Industrial Development Corporation) on a 99-year lease. Later, the leasehold rights were assigned to another party. The GST department issued an intimation of tax as payable under section 74(5) at the rate of 18% of Rs 57,54,800, along with interest and penalty. Due to this, the petitioner raised objections on 02.08.2024, but the GST department issued a show cause notice under section 74(1) on 03.08.2024, ignoring the objection filed by the petitioner.

Bansi Industries filed a petition, where this show cause notice demanding Rs 10,35,864 was quashed. However, the tax officer still passed an Order-in-Original dated 31.12.2024 demanding tax. Therefore, the company filed another petition to challenge and cancel this final order.

The learned advocate appearing for the petitioner argued that the show cause notice was already quashed by the Court, and yet the department issued an Order-in-Original. He also submitted that the same issue is covered in the case of Gujarat Chamber of Commerce and Industry & Ors Vs. Union of India & Ors.

The bench comprising Mr. Justice Bhargav D. Karia and Mr. Justice Pranav Trivedi observed the decision passed by the court in the case of Gujarat Chamber of Commerce and Industry, which stated that if the land allotted by GIDC is assigned or transferred by the lessee in favour of a third party for consideration, then such a transaction shall be considered as the assignment/sale/transfer of immovable property. In such a case, Section 7(1)(a) of the GST Act is not applicable, and GST cannot be levied for such a transaction. The court also observed that it had already cancelled the show cause notice dated 03.08.202. Therefore, the court set aside and quashed the Order-in-Original dated 31.12.2024.