Assignment of GIDC Leasehold Rights Is Transfer of Benefits Out of Immovable Property, Not Taxable Under GST

By | October 16, 2026
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Assignment of GIDC Leasehold Rights Is Transfer of Benefits Out of Immovable Property, Not Taxable Under GST

Issue

Whether the assignment, transfer, or sale of leasehold rights in a GIDC industrial plot constitutes a taxable supply under Section 7 of the CGST/GGST Act, 2017 attracting GST.

Facts

  • Original Allotment & E-Auction: GIDC originally allotted an industrial plot on licence in 1990. Following a departmental e-auction in April 2018, the successful bidder nominated the respondent.
  • Transfer of Rights: GIDC transferred leasehold rights to the respondent in January 2019, and a formal agreement between the successful bidder and the respondent was executed in March 2019 for Assessment Year / Period 2018-19.
  • Show Cause Notice & Confirmation: The Revenue issued a Show Cause Notice alleging deliberate withholding of tax, invoking the extended period of limitation alongside penalty provisions. The Assessing Officer confirmed the GST demand with interest and equal penalties.
  • Appellate Authority Ruling: The Appellate Authority allowed the assessee’s appeal, relying on judicial precedent to set aside GST demands levied on assignees under reverse charge for the assignment of GIDC leasehold rights to third parties.
  • Department Appeal: The Revenue filed an appeal before the Tribunal challenging the Order-in-Appeal.

Decision

  • Held that the issue is squarely covered by the decision of the Gujarat High Court in Gujarat Chamber of Commerce and Industry v. Union of India   (Guj.).
  • Held that the assignment, sale, or transfer of leasehold rights in GIDC land constitutes a transfer of benefits arising out of immovable property and falls outside the scope of GST levy under Section 7.
  • Held that GST is not leviable on the subject assignment of leasehold rights.
  • Held that consequential issues regarding the extended period of limitation, penalties, and reverse charge liability do not survive.
  • Dismissed the Department’s appeals and upheld the Orders-in-Appeal in favor of the assessee.

Key Takeaways

  • Outside GST Scope: The assignment or transfer of long-term leasehold rights in immovable property (such as GIDC industrial plots) represents a benefit arising out of land, rendering it non-taxable under GST.
  • Inapplicability of Reverse Charge: Assignees cannot be subjected to reverse charge GST demands on the acquisition or transfer of leasehold land rights.
  • Extinguishment of Penalties and Extended Limitation: When the underlying transaction falls outside the scope of supply, demands based on extended limitation periods, interest, and equal penalties under Section 74 automatically become unsustainable.
GOODS AND SERVICE TAX APPELLATE TRIBUNAL , SURAT BENCH
Assistant Commissioner of CGST & Central Excise
v.
Pragna Chemical Industries
Sanjaykumar Dwivedi, Judicial Member
and Ramesh Kumar Gokalbhai Hadvani, Technical Member
APL/59, 82 & 83/SRT/2026
OCTOBER  6, 2026
Maya Shanker Prabhat, Superintendent (Authorized Representative) for the Appellant. Vinay Kansara, Adv. for the Respondent.
ORDER
Sanjaykumar Dwivedi, Judicial Member. – These three appeals have been filed by the department against Orders-in-Appeals by which the Appellate Authority has set aside the demand of GST on assignment of leasehold rights in the plots of land allotted on lease by the Gujarat Industrial Development Corporation (GIDC), to a third party. The Respondents are the assignees, and the department has demanded tax from them under the reverse charge mechanism. In all these cases, the Appellate Authority has followed the judgment dated 03/01/2025 of Hon’ble Gujarat High Court in Gujarat Chamber of Commerce and Industry v. Union of India   251/94 GSTL 113 (Gujarat)/(R/Special Civil Application No. 11345 of 2023 ) to hold that GST is not payable on the transaction.
2. Before proceeding further, we note that the names of the parties in the cause titles appearing on the GSTAT Portal are erroneous. We are informed that this is on account of the present design of the portal and that the Registry is unable to correct it. We have, therefore, corrected the cause titles as shown in the table below. Other details such as address, GSTIN etc. remain unchanged:
Sr. No. Appeal No. and the last date of hearing Cause Title as appearing on the portal Cause Title as corrected and mentioned in this order
1. APL/SRT/059/2026 Heard on 1st September, 2026 K Dharamveer Chowhan Versus Pragna Chemical Industries Assistant Commissioner of Central GST, Division- IX, Ankleshwar, Vadodara-II Versus Pragna Chemical Industries
2. APL/SRT/082/2026 Heard on 23rd September 2026 K Dharamveer Chowhan Versus Shivabhishek Industrial Park Pvt. Ltd. Assistant Commissioner of Central GST, Division- IX, Ankleshwar, Vadodara-II Versus Shivabhishek Industrial Park Pvt. Ltd.
3. APL/SRT/083/2026 Heard on 23rd September 2026 K Dharamveer Chowhan Versus Kumar Packaging Assistant Commissioner of Central GST, Division- IX, Ankleshwar, Vadodara-II Versus Kumar Packaging

 

3. For convenience, the facts are taken from the Appeal No. APL/SRT/059/2026 (Commissioner of CGST, Vadodara-II v. Pragna Chemical Industries).
3.1. Briefly stated, the facts are that in the year 1990 GIDC allotted Plot No. 7311 situated at GIDC Industrial Estate, Ankleshwar to one Mr. Vinay R S Jain under a license agreement. Later, the Central Excise and Customs department attached the said property for recovery of the dues of Tulsi Alloys Pvt. Ltd., who had defaulted in payment of Central Excise and Service Tax.
3.2. An e-auction was conducted by MSTC Ltd. on behalf of the Central Excise and Customs department on 26.04.2018. One M/s. Raj Enterprise emerged as the successful bidder and was declared the purchaser. Raj Enterprise, in turn, transferred its rights to the Respondent Pragna Chemical Industries, by nominating it the person to whom the property was to be transferred. An agreement was entered into between Raj Enterprises and the Respondent on 05.03.2019. GIDC vide Office Order No. GIDC/ RM/ ANK/ TRF/ FFO/ ANKI/ 583 dated 24.01.2019, transferred the leasehold right in the said plot to the Respondent. Thus, the Respondent became the assignee or recipient of the leasehold rights.
3.3. A Show Cause Notice was issued to the Respondent demanding GST on the said transaction. The notice alleged that the Respondent had deliberately withheld information from the department about supply of service, and that the facts came to the notice of the department only after it conducted an investigation. On that basis, the provisions of Section 74 and 122(2)(b) of the Central GST Act, 2017 were invoked. These allegations were made even though:
(i) the transaction took place through an auction conducted by the department itself;
(ii) the certificate in Form Appendix IX was issued by the Dy. Commissioner, Division IX, who also had jurisdiction over the Respondent under the Central GST law; and
(iii) the department authorised GIDC to transfer the lease to the Respondent.
3.4. The adjudicating authority confirmed the demand of tax along with interest and imposed penalty equal to tax under Section 74(1) and again imposed a further penalty of equal amount under Section 122(2)(b) of the Central GST Act, 2017. The Appellate Authority allowed the Appeal of the Respondent herein, relying on the judgment of the Hon’ble Gujarat High Court in Gujarat Chamber of Commerce and Industry (supra).
4. Mr. Maya Shanker Prabhat, learned Superintendent (Authorised Representative) appearing for the department reiterates the grounds raised in the appeal memo and submits that the appeals were filed because the department had filed a Special Leave Petition (SLP) before the Hon’ble Supreme Court against the judgment in Gujarat Chamber of Commerce. He further submits that although the SLPs filed by the department have since been dismissed by the Hon’ble Supreme Court, the department is in the process of filing a review petition.
5. Mr. Vinay Kansara, learned Advocate appearing for Pragna Chemical Industries, submits that the judgment of the Gujarat Chamber of Commerce and Industry, supra prevails and is binding.
6. We have heard both sides and perused the record.
7. It is not in dispute that the present case is squarely covered by the judgment in Gujarat Chamber of Commerce and Industry, supra. In that case, the issue was whether GST is leviable on assignment of leasehold rights of the plot of land allotted on lease by Gujarat Industrial Development Corporation (GIDC) and building constructed thereon, by the lessee or its successor (assignor) to a third party (assignee) on payment of lump-sum consideration considering the same as supply of service under the provisions of Central/State Goods and Service Tax Act, 2017. The Hon’ble High Court held:
83. In view of foregoing reasons, assignment by sale and transfer of leasehold rights of the plot of land allotted by GIDC to the lessee in favour of third partyassignee for a consideration shall be assignment/sale/ transfer of benefits arising out of “immovable property” by the lessee-assignor in favour of third party-assignee who would become lessee of GIDC in place of original allottee-lessee. In such circumstances, provisions of section 7(1)(a) of the GST Act providing for scope of supply read with clause 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 same would not be subject to levy of GST as provided under section 9 of the GST Act.
84. In view of above, question of utilisation of input tax credit to discharge the liability of GST on such transaction of assignment would not arise.
85. The petitions accordingly succeed and impugned show cause notices and orders in original or appeal as the case may be, are hereby quashed and set aside. Rule is made absolute to the aforesaid extent. No order as to costs.
7.1. The issue also came up before the Hon’ble Bombay High Court in Aerocom Cushions (P.) Ltd. v. Asstt. Commissioner (Anti-Evasion), CGST & CX, Nagpur-1 106 GSTL 145 (Bombay)/[2026:BHC-NAG:348-DB]. Agreeing with the decision of the Hon’ble Gujarat High Court in Gujarat Chamber of Commerce and Industry, supra, Hon’ble Bombay High Court by its judgment dated 09.01.2026 held:
13. ……………….We subscribe to this view for the reasons quoted in earlier part of our judgment so also because the view, in our considered opinion, is in consonance with the provisions of law on supply of services.”
14. ……………….. Further we subscribe to the finding of Gujarat High Court that the assignment by sale and a transfer of leasehold rights of the plot of land allotted by the Corporation like GIDC or MIDC to the lessee in favour of third party-assignee for a consideration shall be assignment/sale/transfer of benefits arising out of immovable property by the lessee-assignor in favour of third party and in such circumstances, the transaction would not be subject to levy of GST in terms of the GST Act.
15. The writ petition is accordingly allowed. Show cause notice No.47/AC/GST/NGP-I/2024 dated 20-12-2024 issued by respondent No.1 is quashed and set aside.
7.2. The department’s Petition Asstt. Commissioner (Anti Evasion) v. Aerocom Cushions (P.) Ltd.  116 GST 80/109 GSTL 289 (SC)/(SLP (C) No. 18772/2026) against the judgment in Aerocom Cushions came up before the Hon’ble Supreme Court on 22nd May 2026 when the following order was passed:
“We are not inclined to interfere with the impugned judgment and order of the High Court, hence, the special leave petition is dismissed.”
7.3. The department’s Petition Union of India v. Gujarat Chamber of Commerce and Industry  117 GST 159/111 GSTL 97 (SC)/(Diary No. 33270/2025) against the judgment in Gujarat Chamber of Commerce, came up before the Hon’ble Supreme Court on 21st July 2026 when the following order was passed:
1. Delay condoned.
2. This Court, vide order dated 22.05.2026, has already dismissed a Special Leave Petition, being Aerocom Cushions (P.) Ltd. (supra).
3. In view of the fact that a similar SLP has been dismissed, the instant special leave petitions are dismissed.
4. Pending application(s), if any, shall stand disposed of.
7.4. In view of the above, the judgments of Hon’ble Gujarat High Court, which is the jurisdictional High Court, holds the field and binds the Tribunal. The department’s stated intention to seek a review does not dilute its binding effect, there being no order staying or recalling it.
8. We accordingly hold that GST is not leviable on the transactions in question.
9. In view of this finding, the questions whether provisions of Section 74 and 122(2)(b) were rightly invoked in the facts of these cases, and whether the reverse charge mechanism is applicable, do not survive for our consideration.
10. The appeals filed by the department are accordingly dismissed, and the Orders-in-Appeal are upheld.