Supreme Court Upholds Taxpayer Relief on GST for Industrial Leasehold Rights Transfer

The Supreme Court has upheld the Gujarat High Court's ruling that the transfer of long-term leasehold rights in industrial plots allotted by the Gujarat Industrial Development Corporation (GIDC) is not subject to Goods and Services Tax (GST). The apex court dismissed the Centre's Special Leave Petitions (SLPs), reaffirming the legal position established by the High Court.

A Bench comprising Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe noted that a similar petition on the same issue had already been dismissed earlier, thereby reinforcing the court's consistent approach.

The decision provides legal certainty to industrial units in Gujarat that had been issued GST demand notices after the introduction of the GST regime in 2017. Tax authorities had classified the transfer of long-term leasehold rights as a taxable supply of services and sought to levy 18% GST on such transactions.

Taxpayers challenged these demands, contending that the complete transfer of leasehold rights constitutes the transfer of an interest in immovable property rather than a supply of services. They argued that such transactions fall under Schedule III of the Central Goods and Services Tax (CGST) Act, which excludes the sale of land and specified transactions relating to immovable property from the scope of GST. They also maintained that stamp duty is already payable on these transfers, making an additional GST levy inappropriate.

The Gujarat High Court had earlier ruled that where a lessee transfers the entire long-term leasehold interest and relinquishes all rights in the property, the transaction amounts to the transfer of immovable property and therefore falls outside the ambit of GST. The High Court consequently quashed multiple GST demand notices issued in similar cases.

With the Supreme Court declining to interfere, the legal position now stands affirmed for the disputed transactions in Gujarat. The ruling is expected to provide relief to businesses that received GST demands on such transfers and may also enable eligible taxpayers to seek refunds where GST had been paid during investigations, subject to applicable legal provisions.

While the judgment specifically concerns transfers of long-term leasehold rights in GIDC industrial plots, it also reinforces the legal principle that genuine transfers of interests in immovable property are generally not treated as taxable supplies under the GST framework, subject to the facts of each case. CA Sansaar