GST Refund on GIDC Plot Assignment (Leasehold Rights)

By | February 9, 2026

GST Refund on GIDC Plot Assignment (Leasehold Rights)


1. The Dispute: Refund Stalled by “Deficiency Memos”

The petitioner acquired leasehold rights for a GIDC plot and paid GST on the transaction. Following a landmark ruling by the Gujarat High Court, which clarified that such transfers are akin to the “sale of land” (and thus exempt from GST), the petitioner filed for a refund under Section 54.

  • The Obstacle: The Revenue department issued multiple Deficiency Memos (RFD-03) to stop the refund.

  • The Excuses: The department claimed that the documents were “illegible” and that there was no specific circular or notification from the GST Council authorizing a refund for leasehold assignments.


2. Legal Analysis: Judicial Precedent vs. Administrative Delay

The Court took a stern view of the department’s refusal to process the refund despite a clear, binding judgment from the jurisdictional High Court.

I. “Sale of Land” Principle

The Court reiterated its position from the GCCI case: The assignment of long-term leasehold rights for a lump-sum consideration is not a “supply of service” but a transfer of benefits arising out of immovable property.

  • Schedule III, Entry 5: This transaction is treated as a sale of land/building, which is outside the ambit of GST.

  • Result: The GST collected was “without authority of law” and must be refunded.

II. Invalidity of Deficiency Memos

The Court held that a Deficiency Memo (RFD-03) is meant for procedural errors, not for rejecting a claim on its merits.

  • Circular not required: A refund authority cannot wait for a “Circular” to follow a High Court order. The law declared by the Court is binding on all state authorities within its jurisdiction.


3. The Ruling: Exemplary Costs for Delay

The Court issued an unprecedented, time-bound directive to ensure the taxpayer received their money without further harassment.

  • Mandatory Refund: The State Government fairly conceded during the hearing that the refund would be paid upon a fresh application.

  • Strict Timeline: The Court ordered the refund to be sanctioned and paid within two weeks (some reports state one week) from the date of the fresh application.

  • Safeguard: The petitioner was given the “liberty to revive” the petition if the money was not received.

  • Penalty on Officers: The Court warned that if the petition is revived due to non-payment, exemplary costs of ₹25,000 would be recovered personally from the erring officer.


Key Takeaways for GIDC/MIDC Plot Allottees

  1. Stop Paying GST on Assignment: If you are assigning or acquiring GIDC leasehold rights, refer to the GCCI (Gujarat) or Aerocom Cushions (Bombay, Jan 2026) rulings to dispute the levy of 18% GST.

  2. Refund Opportunity: If you have already paid GST on such transfers, file a refund claim under “Excess payment of tax” or “Any other” category in Form RFD-01.

  3. Bypass “Lack of Circular” Excuses: If the officer issues a deficiency memo citing a “lack of GST Council guidance,” you can challenge it in the High Court as a violation of judicial discipline.

  4. Recover Interest: If you paid tax “under protest” during an investigation, you are also eligible for a refund of the interest paid, as seen in the Meghaaarika Enterprises (2025) ruling.

HIGH COURT OF GUJARAT
Aquaeva Chemtech (P.) Ltd.
v.
State of Gujarat*
A.S. Supehia and Pranav Trivedi, JJ.
R/SPECIAL CIVIL APPLICATION NO. 621 of 2026
JANUARY  22, 2026
Paresh V Sheth for the Petitioner. Ms Tanushree Shrimali, AGP for the Respondent.
ORDER
A. S. SUPEHIA, J.- Heard Mr. Paresh V. Sheth, learned advocate for the petitioner and Ms. Tanushree Shrimali, learned AGP for the respondents. Learned AGP has fairly pointed out the order dated 18.12.2025 passed by this Court in Payal Plastichem (P.) Ltd. v. State of Gujarat (Gujarat)/Special Civil Application No.12120 of 2025 and submitted that the matter may be disposed of in said terms.
2. By filing this writ petition, the petitioner has prayed for quashing and setting aside the Deficiency Memos dated 10.3.2025 and 19.5.2025 issued by respondent no.3 and to direct the respondent to grant the refund claim.
3. Reliance is placed on the judgment rendered by this Court in the case of Gujarat Chamber of Commerce and Industry v. Union of India (Gujarat)/(2025) 26 Centax 150 (Guj), wherein this Court has held that assignment/ transfer of the leasehold rights in land by the lessor to the lessee is at par with sale of land and it does not amount to supply, and hence the GST is not payable. The respondent no.3 has denied the refund claim by issuing deficiency memo GST-RFD-03 dated 19.5.2025 without applying the mind to the law enunciated by this Court in the case of Gujarat Chamber of Commerce and Industry (supra).
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 (supra) 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. Tanushree Shrimali for the respondents has tendered communication dated 22.1.2026 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. Shrimali 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 two weeks from the date of receipt of such application.
6. With these 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.F
Category: GST

About CA Satbir Singh

Chartered Accountant having 12+ years of Experience in Taxation , Finance and GST related matters and can be reached at Email : Taxheal@gmail.com