GST Not Payable on DDA Conversion Charges for Leasehold-to-Freehold | HC

Case Details: Mala Sahni Seth vs. Delhi Development Authority - [2025] 180 taxmann.com 303 (Delhi)

Judiciary and Counsel Details

• Prathiba M. Singh & Shail Jain, JJ.
• Sandeep Sethi, Sr. Adv., Saurabh Seth, Sukrit Seth & Ms Aishwarya Modi, Advs. for the Petitioner.
• Pratyush Mishra, Mr Rajeev Lochan Mahunta, Mr Sahil S Panwar, Mr Bhanu Katyal, Advs. & Ms Anushree Narain, SSC for the Respondent.

Facts of the Case

The petitioner is the leasehold owner of certain units who paid conversion charges to the Delhi Development Authority (DDA) to convert their property into freehold, without any GST being levied. The DDA issued a retrospective demand of approximately those conversion charges, which treats conversion charges as consideration for foregoing future lease rent. The petitioner challenged this, arguing that the DDA’s conversion scheme made no provision for GST and that converting leasehold to freehold is part of the sale of immovable property, not a service. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that, prima facie, GST is not leviable on the conversion charges because conversion from leasehold to freehold appears to be part of the sale of immovable property, which is excluded from supply under the CGST Act. The Court interpreted Section 7 and Schedule II/III of the CGST Act, noting that the DDA’s attempt to classify conversion charges as ‘agreeing to refrain from collecting future rent’ is inconsistent with the nature of the transaction The conversion charges should be treated as sale consideration, not a service, and that the DDA’s retrospective GST demand under its SOP is, on its face, unsustainable.

List of Cases Referred to

• Estate Officer v. Charanjit Kaur [Civil Appeal No. 4964 of 2021, dated 7-9-2021] (para 10).