GST demand quashed as transfer of GIDC leasehold rights held outside scope of supply

Case: Saurashtra Tin and Metal Industries v. Union of India & Ors.
Court: High Court of Gujarat at Ahmedabad
Petition: R/Special Civil Application No. 6279 of 2025
Judgment Date: 06.05.2025
Category: Classification / Scope of Supply
Relevant Sections: Section 7 & 73 of CGST Act, 2017; Notification 11/2017-CT (Rate), Entry 16 Heading 9972; Rule 142 CGST Rules, 2017

Facts (Paras 5.1–5.8)

The petitioner, allotted a GIDC industrial plot in 1994, transferred leasehold rights in 2021 to M/s Janani Incast for ₹13.69 crore via deed of assignment. No GST was charged on the transfer. Later, summons and a show cause notice under Section 73 were issued demanding ₹2.46 crore GST, treating the transaction as supply of real estate services under Notification 11/2017. The petitioner relied on Gujarat High Court’s earlier judgment (SCA No. 11345/2023) to argue that assignment of leasehold rights is not a taxable supply. Despite this, the adjudicating authority confirmed the demand citing the Government’s intention to appeal.

Questions before Court

• Whether transfer of leasehold rights in a GIDC plot through assignment amounts to a “supply of service” liable to GST under Notification 11/2017?

• Whether adjudicating authority can ignore binding High Court precedent merely because the Government intends to challenge it?

Observations (Paras 6–10)

The Court noted that the issue was already settled in Gujarat Chamber of Commerce & Industry v. Union of India (2025), where it was held that assignment of leasehold rights is transfer of an interest in immovable property and falls outside the definition of “supply.” Similar rulings were followed in Kabir Instrument & Technology v. UOI and Alfa Tools Pvt. Ltd. v. UOI. The Court emphasized that unless there is a stay from higher forums, adjudicating authorities are bound to follow binding precedents. The respondent’s contention that the matter is under challenge could not justify departure from law settled by the jurisdictional High Court.

Judgment (Paras 10–11)

The Court held that assignment of leasehold rights is not taxable under GST, quashed the demand order in Form DRC-07, and set aside the SCN in Form DRC-01. The petition was allowed as the impugned order was ex-facie illegal and without jurisdiction.

Table of Cases Referred

Between Fine Lines

For businesses holding GIDC plots, this judgment provides significant clarity. Transfer of leasehold rights through assignment is treated as immovable property transfer, not a taxable service. Unless the Supreme Court rules otherwise, taxpayers in Gujarat can rely on this precedent to contest similar GST demands.

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