The Supreme Court on July 21 delivered a significant victory for taxpayers by dismissing the Centre's special leave petitions against a January 2025 Gujarat High Court order. According to reports from Business Standard, a bench of Justices Pamidighantam Sri Narasimha and Alok Aradhe held that goods and services tax (GST) cannot be charged when companies transfer long-term leasehold rights in industrial plots allotted by the Gujarat Industrial Development Corporation (GIDC). The court noted that it had already dismissed a similar petition on May 22, bringing finality to a dispute that had left many industrial units in Gujarat facing large tax demands.
As reported by Business Standard, GIDC allots industrial land to companies on long-term leases, usually for 99 years. After GST was introduced in 2017, tax authorities began treating such transfers as a taxable service and issued show-cause notices demanding 18 per cent GST. Companies and the Gujarat Chamber of Commerce and Industry challenged these notices, arguing that transferring full leasehold rights is essentially a sale of an interest in land, which is treated as immovable property and is specifically kept outside GST under Schedule III of the CGST Act. They contended that stamp duty is already paid on such transfers, so charging GST would amount to double taxation.
According to Business Standard, in January 2025, the Gujarat High Court accepted the taxpayers' argument. The court ruled that when a lessee completely transfers the long-term lease rights and steps out of the picture, the transaction is a transfer of immovable property and not a 'supply of service'. Therefore, GST does not apply, and the High Court quashed the tax notices issued in a large batch of cases. The Centre challenged this judgment before the Supreme Court through an SLP, which is the legal route to seek the apex court's permission to appeal. The Supreme Court's recent dismissal of the SLP has now established this ruling as a definitive legal precedent.
As reported by Business Standard, Abhishek A Rastogi, founder of Rastogi Chambers, who represents taxpayers before the Supreme Court, stated that the judgment brings finality and ensures that GST is not applicable on the transfer of long-term leasehold rights. He noted that applicable refunds would be available where the amount has been paid during investigation. The order is expected to provide relief to industrial units and clarity to tax authorities dealing with similar transfers of long-term lease rights in industrial estates, according to industry experts. This ruling establishes important legal principles that prevent double taxation on genuine property transactions and protects bona fide purchasers from retrospective denial of input tax credit.
