Transfer or Assignment of Leasehold Rights of Industrial Plots Not Taxable Supply under GST: Gujarat HC [Read Order]
Gujarat HC ruled that transfer or assignment of leasehold rights of industrial plots is not a taxable supply under GST.
Leasehold Rights - Industrial Plots - GST - Gujarat HC - taxscan
Leasehold Rights - Industrial Plots - GST - Gujarat HC - taxscan
In a recent ruling, the Gujarat High Court held that the transfer or assignment of leasehold rights of industrial plots does not amount to a taxable supply under the Goods and Services Tax Act, 2017.
BVM Pharma, a partnership firm, transferred its industrial plot in Dahej II Industrial Estate to M/s Dayaram Pharma Chem through a final transfer order issued by GIDC in December 2019.
Later, the tax department issued a show causenotice in May 2024 demanding GST of 25,32,747 with interest and penalty, on the ground that the transfer fees received for the assignment of leasehold rights were liable to GST.
An order was subsequently passed under Section 73 of the Act in August 2024 confirming a total demand of about 49.26 lakh.
The petitioner’s counsel argued that assignment of leasehold rights of land and buildings does not fall within the scope of “supply” under Section 7 of the GST Act, and hence no GST could be levied.
They relied on the Gujarat High Court’s earlier judgment in Gujarat Chamber of Commerce and Industry v. Union of India, which had explained that such transfer is essentially an assignment of immovable property and is not taxable under GST. It was also pointed out that the same principle was applied in the subsequent case of Alfa Tools Pvt. Ltd. v. Union of India.
The counsel for the respondents was unable to dispute the applicability of the earlier decisions.
The Division Bench comprising Justice Bhargav D. Karia and Justice D.N. Ray observed that it was an undisputed fact that the petitioner had transferred leasehold rights of the industrial plot, and in view of the binding precedent in Gujarat Chamber of Commerce and Industry, the transaction could not be treated as a taxable supply.
The court explained that provisions of Section 7(1)(a) read with Schedule II and Schedule III were not attracted to such a transaction, and no GST liability could arise.
The court quashed both the show cause notice issued in May 2024 and the order of demand passed in August 2024. The writ petition was allowed, and rule was made absolute, with no order as to costs.
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