Facts of the Case:

The petitioners, including the Gujarat Chamber of Commerce and Industry and several industrial entities, challenged the levy of GST on the assignment of leasehold rights in industrial plots allotted by the Gujarat Industrial Development Corporation (GIDC). Under GIDC’s allotment policy, industrial plots were granted on a long-term lease of 99 years, with the lease deed permitting the lessee to assign its leasehold rights to a third party after obtaining GIDC’s approval and payment of prescribed transfer charges. Following the introduction of the GST regime, the tax authorities issued show cause notices proposing to levy GST at 18% on the consideration received for such assignments, treating the transaction as a supply of service.

The petitioners contended that the assignment amounted to an outright transfer of an interest in immovable property, whereas the revenue maintained that leasehold rights were merely intangible rights whose transfer constituted a taxable service.

Issue:

Whether the assignment of leasehold rights in industrial plots allotted by GIDC constitutes a taxable supply of service under the GST law, or whether it is a transfer of immovable property falling outside the ambit of GST under Schedule III of the CGST Act.

Held That:

The Hon’ble Supreme Court of India has dismissed the Special Leave Petition (SLP) filed against the landmark judgment of the Gujarat High Court. The bench noted that an identical SLP on the matter had already been rejected on May 22, 2026. Therefore, the Supreme Court refused to interfere, allowing the Gujarat High Court’s verdict to stand with finality. Hence, No GST is leviable on the sale, assignment, or transfer of GIDC leasehold industrial plots. All pending show-cause notices and 18% GST demands regarding these transfers are legally quashed. 

Earlier, the Gujarat High Court vide its judgment dated 03.01.2025, allowed the writ petitions and held that the assignment of leasehold rights is not liable to GST. The Court observed that leasehold rights confer valuable rights to possess, enjoy and transfer an interest in land, which constitute benefits arising out of land and therefore qualify as immovable property under the Transfer of Property Act, the Registration Act and the General Clauses Act. It held that an assignment of leasehold rights results in an absolute transfer of the assignor’s entire interest in favour of the assignee, who thereafter steps into the shoes of the original lessee and becomes directly liable to GIDC. Such a transaction is fundamentally different from renting or sub-leasing and cannot be characterized as a continuation of the original leasing service. Consequently, the Court held that the assignment of leasehold rights is akin to the transfer or sale of immovable property and falls within the exclusion contained in Clause 5 of Schedule III of the CGST Act, which excludes sale of land and buildings from the ambit of supply. Accordingly, the show cause notices demanding GST were quashed. 

Here, the Supreme Court’s dismissal of the Revenue’s SLP has effectively settled the controversy, providing significant relief to industrial units and businesses dealing in long-term leasehold transfers.