Leasehold Rights Transfer Not Taxable Under GST | HC

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Leasehold Rights Under GST

Case Details: Life Sciences Chemicals vs. Union of India - [2025] 175 taxmann.com 540 (Gujarat)

Judiciary and Counsel Details

  • Bhargav D. Karia & D.N. Ray, JJ.
  • Hardik V. Vora for the Petitioner.
  • Ankit Shah for the Respondent.

Facts of the Case

The petitioner, a sole proprietorship concern, was assigned leasehold rights in a plot situated in an Industrial Estate, which had originally been allotted to an erstwhile partnership firm. Upon transfer of the leasehold rights, the jurisdictional officer under CGST issued a notice demanding GST on the ground that the transaction constituted a taxable supply. The petitioner submitted that the transfer of leasehold rights was, in substance, a transaction tantamount to a ‘sale of land’, which is excluded from the scope of ‘supply’ under Entry 5 of Schedule III to the CGST Act, 2017.

It was further contended that such a transaction does not fall within Section 7(1)(a) of the CGST Act, 2017 and is thus not exigible to tax under Section 9. Notwithstanding these contentions, an order was passed demanding tax and penalty under Section 74 of the CGST Act, 2017 read with the Gujarat Goods and Services Tax Act, 2017. The matter was accordingly placed before the Gujarat High Court.

High Court Held

The Gujarat High Court held that the assignment of leasehold rights in land is a transaction equivalent to a ‘sale of land’ and is expressly covered by Entry 5 of Schedule III to the CGST Act, 2017, which excludes such transactions from the ambit of supply. Referring to Gujarat Chamber of Commerce and Industry v. Union of India [2025] 170 taxmann.com 251 (Gujarat)/[2025] 94 GSTL 113 (Gujarat), the Court observed that such lease assignments do not fall within Section 7(1)(a), nor are they covered under Entry 2(a) of Schedule II. The Court also relied upon the legal framework under Sections 105 and 108 of the Transfer of Property Act, 1882 to support its interpretation. Accordingly, the order demanding GST and penalty was quashed.

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List of Cases Referred to

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied