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
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.
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.
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.
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.