Case Summary
Case Title: Quilon Real Industries Pvt. Ltd. v. Union of India & Ors.
Court: High Court of Gujarat at Ahmedabad
Petition No.: R/Special Civil Application No. 3585 of 2025
Date of Judgment: 04 July 2025
Category of Dispute: Classification – Assignment of leasehold rights (Supply vs. Immovable property)
Relevant Sections: Sections 7(1)(a), 9, 74 of the CGST/SGST Act; Clause 5(b) of Schedule II; Clause 5 of Schedule III
Facts (Paras 1–2.4)
The petitioner, Quilon Real Industries Pvt. Ltd., was allotted an industrial plot by the Gujarat Industrial Development Corporation (GIDC). Later, the petitioner transferred the plot to M/s Jay Chemical Industries Ltd. and received ₹4.26 crore in consideration. The tax authorities treated this transfer of leasehold rights as a taxable supply of service under Section 7(1A) read with Heading 9972, demanding GST of ₹76.68 lakh. Orders under Section 74 and FORM DRC-07 confirmed the demand, prompting the present writ petition.
Questions before the Court
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Whether assignment of leasehold rights by the petitioner to a third party constitutes a “supply of service” under GST.
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Whether such transfer should instead be treated as sale/transfer of immovable property, which falls outside the purview of GST.
Observations (Paras 5, 61–83)
The Court relied heavily on its earlier ruling in Gujarat Chamber of Commerce v. Union of India and Supreme Court precedents such as Gopal Saran v. Satya Narayana (1989) and Byramjee Jeejeebhoy (AIR 1965 SC 590).
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It noted that a GIDC lease is a long-term right where the ownership remains with GIDC, but assignment of such leasehold rights by the lessee extinguishes the lessee’s estate and vests complete rights in the assignee.
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Assignment of leasehold rights is a transfer of an interest in immovable property, akin to sale, and not merely a service.
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Clause 5 of Schedule III excludes sale of land from GST scope. Assignment of leasehold rights is covered within this exclusion.
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Stamp duty is payable on such transfers, reinforcing their character as immovable property transactions, not services.
Judgment (Paras 6–7)
The Court held that assignment of leasehold rights amounts to transfer/sale of immovable property and not supply of service. Consequently:
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The impugned order dated 05.02.2025 in FORM GST DRC-07 and SCN dated 26.07.2024 were quashed and set aside.
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GST demand of ₹76.68 lakh was annulled.
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The petition was allowed with no order as to costs.
Table of Cases Referred
| Case | Court & Citation | Verdict |
|---|---|---|
| Gujarat Chamber of Commerce v. Union of India | Gujarat HC, SCA No. 11345 of 2023 | Held that assignment of leasehold rights is transfer of immovable property and outside GST scope. |
| Gopal Saran v. Satya Narayana (1989) 3 SCC 56 | Supreme Court | Defined “assignment” as absolute transfer of property rights, reinforcing its immovable property nature. |
| Byramjee Jeejeebhoy (P) Ltd. v. State of Maharashtra AIR 1965 SC 590 | Supreme Court | Clarified distinction between lease and sale; assignment conveys entire interest akin to ownership transfer. |
Between Fine Lines
For industry and trade, this ruling clarifies that transfer of leasehold rights in industrial plots allotted by GIDC is not a taxable service under GST. Businesses need not pay GST on such assignments; however, stamp duty liability continues. This provides significant relief to entities engaged in industrial land transfers and prevents double taxation.
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