The Gujarat High Court in the case of DHIRAJ CAN CO. PVT. LTD. VERSUS THE UNION OF INDIA & ORS. Vide R/SPECIAL CIVIL APPLICATION NO. 3596 of 2025 dated 04.07.2025, reiterated that transfer of leasehold rights is not a taxable supply under GST as it is akin to sale of land, which is excluded under Schedule III.
Facts of the Case: In this case, the petitioner was allotted an industrial plot by the Gujarat Industrial Development Corporation (GIDC). In 2020, the petitioner applied to GIDC to transfer the leasehold rights to M/s Acquire Chemicals, which was approved on 16.03.2020. A Deed of Assignment was executed on 30.06.2020, and the petitioner received ₹75 lakhs as consideration. No GST was charged or collected on the transaction.
The Petitioner was issued summons under Section 70(1), SCN in FORM GST DRC-01 and Order in FORM GST DRC-07 confirming the demand under Section 73 of the GST Act. The demand was based on the premise that the assignment of leasehold rights was a “supply of service” classifiable under SAC 9972.
Issue: Whether the assignment of leasehold rights in an industrial plot by the lessee to a third party amounts to a supply of service liable to GST under Section 9, read with Section 7(1)(a) of the CGST Act and Schedule II, or whether it constitutes a transfer of immovable property outside the scope of GST.
Held that: The Court held that assignment of leasehold rights in immovable property is not a “supply of service” under Section 7(1)(a) of the CGST Act. Such a transaction is a transfer of immovable property, falling under Entry 5 of Schedule III, which is excluded from the scope of GST.
The Deed of Assignment transferred the petitioner’s entire interest in the land to the assignee, and such absolute transfer qualifies as a sale of immovable property, not as a service. Therefore, no GST can be levied under Section 9, and the transaction is not classifiable under SAC 9972. The High Court followed its earlier ruling in Gujarat Chamber of Commerce & Industry v. Union of India.
The Court quashed and set aside the show-cause notice and order under Section 73 and the Form GST DRC-07.
To read the complete judgment 2025 Taxo.online 1443
