HC Rules GST Not Leviable on Transfer of Leasehold Rights in GIDC Land

The petitioner, Luna Chemical Industries Pvt. Ltd., had originally acquired leasehold rights over an industrial plot allotted by GIDC. Subsequently, the petitioner transferred its interest in the plot to a third party, M/s. Jal Aqua International, through an assignment deed for consideration.

The GST authorities initiated proceedings by issuing summons and later a show cause notice under Section 74 of the GST Act, alleging that the transfer of leasehold rights constituted a “supply of service” and was therefore taxable. During the pendency of the writ petition, an Order-in-Original was passed confirming a GST demand of Rs. 1.45 crore on the said transaction.

The petitioner challenged both the show cause notice and the order, primarily contending that such transfer amounted to transfer of immovable property and was outside the scope of GST.

Issue Before Court: Whether assignment of leasehold rights in GIDC land amounts to “supply of service” liable to GST under Section 7 of the GST Act?

HC Decided: The High Court allowed the petition and set aside the GST demand, holding that the issue was already settled by earlier precedent.

It clarified that while initial lease allotment may be a service, transfer of leasehold rights to a third party amounts to transfer of immovable property. Since such transactions are akin to sale of land and fall under Schedule III, they are not liable to GST. Accordingly, the notice and demand were quashed.

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