Transfer of Leasehold Rights in Land Not Subject to GST as per Gujarat High Court Precedent

Issue:

Whether the assignment of leasehold rights in a property, for which the original lease was granted for 99 years, is subject to Goods and Services Tax (GST) under the Central Goods and Services Tax Act, 2017/Rajasthan Goods and Services Tax Act, 2017.

Facts:

The petitioner was granted a 99-year lease for a piece of land by the NOIDA industrial development authority. The petitioner subsequently transferred all their rights in this leased land to a third party after obtaining NOIDA’s permission. Requisite stamp duty was paid based on the sale considerations for this transfer. The respondents initiated proceedings under Section 74 of the CGST Act, alleging suppression by the petitioner for not paying GST on this transfer. The petitioner contended that the levy of GST was contrary to the law established by the Gujarat High Court in Gujarat Chamber of Commerce and Industries v. Union of India [2025] GUJHC 1117 (DB), which held that such a transaction would not be covered under Section 7(1)(a) of the CGST Act. The petitioner also noted that the Bombay High Court had granted an interim order in a similar petition. The respondents relied on Builders Association of Navi Mumbai v. Union of India [2018] 12 G.S.T.L. 232 (Bom.).

Decision:

The court held that the issue raised by the petitioner was squarely covered by the judgment in Gujarat Chamber of Commerce and Industries (supra). The reliance placed by the respondents on Builders Association of Navi Mumbai v. Union of India was deemed misplaced, as that case pertained to a lease deed executed by an authority in favor of a lessee, and not a transfer of rights once a lease had already been executed. The matter required consideration, and a notice was issued. The decision was partly in favor of the assessee, with a notice issued.

Key Takeaways:

The transfer or assignment of existing leasehold rights in land, particularly for long durations like 99 years, may not be subject to GST.
Courts are likely to follow precedents from other High Courts, especially when the facts are similar.
The distinction between an initial lease execution by an authority and a subsequent transfer of already existing leasehold rights is crucial for GST applicability.
This judgment indicates a potential stance against levying GST on the assignment of long-term leasehold rights, aligning it more with a transfer of an interest in immovable property rather than a “supply of service.”

HIGH COURT OF ALLAHABAD

BKP Media Vision (P.) Ltd.

Union of India

Arun Bhansali, CJ.
and Kshitij Shailendra, J.

WRIT TAX No. 1845 of 2025

MAY 2, 2025

Anurag Khanna, Sr. Adv., Nikhil Pandey, Gaurav Sarin, Brijesh Verma and Ms. Radhika Bansalfor the Petitioner. Dhananjay Awasthi, Saumitra Singh and Ankur Agarwal, (S.C.) for the Respondent.

ORDER

1. It is, inter alia, submitted by counsel for the petitioner that the petitioner was granted a lease by NOIDA for a period of 99 years. After seeking permission from NOIDA, the petitioner has transferred all his rights in the said leased land to the purchaser.

2. Submissions have been made that the petitioner paid the requisite stamp duty etc. based on the sale considerations and the respondents initiated proceedings under Section 74 of the Goods and Services Tax Act, 2017 (for short ‘the Act’) inter alia alleging suppression on part of the petitioner in not making payment of GST in the said transfer by the petitioner. Submissions have been made that on the transaction made by the petitioner, the levy of GST by the respondents, is contrary to the law as laid down by the Gujarat High Court in Gujarat Chamber of Commerce and Industry v. Union of India GSTL 113 (Gujarat)/2025:GUJHC:1117-DB, wherein the Court came to the conclusion that the transaction of the present nature, would not be covered under Section 7(1)(a) of the Act. Further submissions have been made that invoking provisions of Section 74 of the Act in the present circumstances of the case, cannot be countenanced, inasmuch as, there has been no case of suppression as alleged. Further submissions have been made that following the order passed by the Gujarat High Court, Bombay High Court has also entertained petition of similar nature and has granted interim order.

3. Learned counsel for the respondents vehemently opposed the submissions. Submissions have been made that a contrary view has been taken by the Bombay High Court in Builders Association of Navi Mumbai v. Union of IndiaGST 334/12 GSTL 232/53 GSTR 374 (Bombay) and the said view has been upheld by Hon’ble Supreme Court in Builders Association of Navi Mumbai v. Union of IndiaGST 693/84 GSTL 417 (SC).

4. Apparently, the issue as raised by the petitioner is squarely covered by the judgement in the case of Gujarat Chamber of Commerce and Industries (supra). The reliance placed by the respondents on order in the case of Builders Association of Navi Mumbai (supra) appears to be misplaced as the same pertains to the lease deed executed by the Authority in favour of the lessee and not a case of transfer of the rights once lease has been executed by the authority in favour of the lessee.

5. Matter requires consideration.

6. Issue notice.

7. Counter affidavit be filed within a period of six weeks.

8. In the meanwhile and till further orders, recovery pursuant to the order dated 31.01.2025 in order-in-original passed by the respondent No.3 shall remain stayed.