GST Refund on GIDC Leasehold Rights Transfer allowed; "Lack of Circular" is not a valid ground for rejection

GST Refund on GIDC Leasehold Rights Transfer allowed; “Lack of Circular” is not a valid ground for rejection

Issue

Whether the Department can reject a refund claim for GST paid on the transfer of GIDC leasehold rights by citing “illegible documents” or the “absence of a GST Council circular,” despite a jurisdictional High Court judgment clarifying that such transfers are benefits arising out of immovable property (and thus not taxable).

Facts

Petitioner: A subsidiary company manufacturing plasticizers and PVC compounds.
The Transaction: The petitioner acquired GIDC (Gujarat Industrial Development Corporation) leasehold rights. The original allotment was a 99-year lease, transferred via a final GIDC order.
The Payment: The petitioner had paid GST on this transfer of leasehold rights.
The Claim: Relying on the judgment in Gujarat Chamber of Commerce and Industry v. Union of India [2025], which treated such assignments as benefits arising from immovable property (akin to sale of land/exempt), the petitioner sought a refund of the GST paid.
The Rejection: The Proper Officer issued Deficiency Memos (Form RFD-03) for two successive applications. The reasons cited were:
1. Documents were illegible.
2. Absence of a GST Council circular specifically authorizing such refunds.

Decision

Government Concession: The Government Pleader submitted before the High Court that if the petitioner files a fresh application, the refund will be paid.
Court’s Direction:
- The petitioner was directed to make a fresh refund application.
- The authorities were ordered to process and pay the refund within a strict timeline of one week from the date of receipt of the application.
Liberty to Revive: The petition was disposed of with the liberty to revive the case if the refund remained unpaid.

Key Takeaways

High Court Judgment > Circular: Determining taxability is a question of law. Once a High Court (like in the Gujarat Chamber of Commerce case) rules that a transaction is not taxable (e.g., Leasehold rights transfer = Immovable Property), the Department cannot deny a refund merely because the GST Council hasn’t issued a circular yet.
GIDC Leasehold Rights: This ruling reinforces the position that the assignment of long-term leasehold rights by development authorities (like GIDC) is often treated as a transaction in immovable property, which may not attract GST.
Speedy Remedy: The Court’s direction to pay within “one week” highlights that administrative delays (Deficiency Memos) cannot be used to harass taxpayers when the legal entitlement is clear.

HIGH COURT OF GUJARAT

Payal Plastichem (P.) Ltd.

State of Gujarat^*

A.S. Supehia and Pranav Trivedi, JJ.

R/SPECIAL CIVIL APPLICATION NO. 12120 of 2025

DECEMBER 18, 2025

Dhaval Shah for the Petitioner. Ms. Nimisha Parekh, Assistant Government Pleader for the Respondent.

ORDER

A.S. Supehia, J.- Heard learned advocate Mr. Dhaval Shah for the petitioner and learned Assistant Government Pleader Ms. Nimisha Parekh for the respondents.

2. By way of this petition, the petitioner has prayed to quash and set aside the Deficiency Memo dated 09.06.2025 issued by the respondent no. 3 and direct the respondent to sanction the refund claim of the petitioner.

3. The facts in brief are that the petitioner is a subsidiary company of Payal Polyplast Private Limited, inter alia engaged in the manufacture of different plasticisers and PVC compounds. It appears that the Gujarat Industrial Development Corporation (GIDC) had allotted a plot in question i.e. D2CH 147, admeasuring 9862.84 sq.mtr., in the Dahej Industrial Estate situated at Revenue Survey No. 797/p, 798/p within the village limit of Dahej, Taluka Vagra, District Bharuch, originally to BVM Pharma for 99 years on long term basis from 04.08.2011. Further the said plot was transferred to one M/s. Dayaram Pharma Chem by the GIDC under the provisional transfer order dated 26.11.2019 and final transfer order dated 24.12.2019.

3.1. It is the case of the petitioner that M/s. Dayaram Pharma Chem obtained the Final Transfer Order to sale the said plot from GIDC and the same was sold to the petitioner under an agreement dated 19.07.2024. The petitioner paid the total amount in two installments. It is further the case of the petitioner that this Court in case of Gujarat Chamber of Commerce and Industry v. Union of India GSTL 113 (Guj)/2025 SCC Online Guj. 225 has held that the assignment by sale and transfer of leasehold rights of the plot allotted by GIDC to the lessee in favour of the third party assignee for a consideration shall be an assignment/sale/transfer of benefits arising out of “immovable property” by the lessee-assignor in favour of the third party-assignee which would become the lessee of GIDC in place of the original allottee-lessee. Thus, in such circumstances, the provisions of Section 7(1)(a) of the Central Goods and Services Tax Act, 2017 (For Short “GST Act”) providing for scope of supply read with Section 5(b) of Schedule II and clause 5 of Schedule III would not be applicable to such transaction of assignment of leasehold rights of land and building and the same would not be subject to levy of GST as provided under Section 9 of the GST Act.

3.2. Thereafter, the petitioner applied for refund of the tax paid on the said leasehold transfer under Section 54 of the GST Act. However, respondent no. 3 issued Deficiency Memo in Form RFD-03 on the ground that the supporting documents are not legible and in addition it was stated that there is no notification or circular published by the GST Council regarding refund of GST paid on lease transaction. Pursuant thereto, the petitioner made another application for refund before the respondent no. 3. Since both the applications of the petitioner were disposed of with Deficiency Memo, the petitioner is constrained to approach this Court by way of the present writ petition.

4. Learned Assistant Government Pleader Ms. Nimisha Parekh for the respondents has tendered communication dated 18.12.2025 received from the office of Deputy Commissioner of State Tax, Range-14 Bharuch, and the same is taken on record. At the outset, learned Assistant Government Pleader Ms. Parekh has submitted that as and when the application is filed by the petitioner for refund of the tax amount paid by the petitioner, the same will be considered and refund will be paid to the petitioner.

5. Under the circumstances, the petitioner shall make an application seeking refund of the amount and in case such application is made by the petitioner, the amount of refund shall be paid to the petitioner within a period of one week from the date of receipt of such application.

6. With this observations, the present petition stands disposed of. However, it is observed that in case the petitioner is not paid the amount of refund within the aforesaid stipulated period, it will be open for the petitioner to revive this petition by filing a simple note before the registry of this Court. It is further observed that in case the petitioner is constrained to revive this petition, an exemplary costs of Rs.25,000/- will be imposed upon the erring officer.