High Court Quashes GST SCN on Assignment of GIDC Leasehold Rights as Tax Not Leviable

Gopal Iron & Steel Co. (Guj) Ltd. challenged a Section 74 SGST notice alleging that its assignment of long-term GIDC leasehold rights to Metlax International Pvt. Ltd. was a taxable service. The transfer took place in 2019 through a registered deed executed with GIDC’s approval as part of a bank-approved settlement. Although the petitioner furnished all documents when summons were issued, the Department issued the SCN even before the response period for the pre-SCN intimation expired. The petitioner relied on the High Court’s ruling in Gujarat Chamber of Commerce & Industry, holding that assignment of long-term GIDC leases is a transfer of immovable property, outside GST.

Main Issue: Whether transferring long-term GIDC leasehold rights constitutes a taxable supply of services under Section 7(1)(a) or a transfer of immovable property excluded from GST.

HC’s Order: The Court followed its earlier decision in Gujarat Chamber of Commerce & Industry and reiterated that the assignment of long-term GIDC leasehold rights operates as a transfer of an immovable property interest. The assignor’s rights are fully extinguished and vest in the assignee, making the transaction equivalent to a sale of immovable property. Such transfers fall outside Section 7(1)(a), are not covered by Schedule II deeming provisions, and squarely fall within Schedule III’s exclusion for the sale of land. No GST can therefore be levied under Section 9.

Since the issue was already settled and the Department lacked jurisdiction, the show-cause notice dated 23.09.2025 was quashed. The petition was allowed in full, with Rule made absolute and no order as to costs.

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