SC backs taxpayers, rules out GST on industrial lease rights transfer
New Delhi, Jul 27, 2026
The apex court dismissed the Centre's petitions against the Gujarat High Court ruling, holding that transfers of long-term GIDC industrial leasehold rights are not subject to GST
Companies cannot be charged goods and services tax (GST) when they transfer long-term leasehold rights in industrial plots allotted by Gujarat Industrial Development Corporation (GIDC), the Supreme Court has ruled while upholding the position of taxpayers and dismissing the Centre’s special leave petitions (SLPs) against a January 2025 Gujarat High Court order.
A Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe noted that the court had already dismissed a similar petition on May 22.
The order brings finality to a dispute that had left many industrial units in Gujarat facing large tax demands.
“The Supreme Court twice declined to interfere on the Revenue’s SLP on this issue, ensuring that GST is not applicable on the transfer of long-term leasehold rights and the applicable refund would be eligible where the amount has been paid during investigation,” said Abhishek A Rastogi, founder of Rastogi Chambers, who represents taxpayers before Supreme Court and several other high courts on this issue.
GIDC allots industrial land to companies on a long-term lease, usually for 99 years. Over time, many original allottees transfer these lease rights to other companies for a lump sum, often after constructing a factory or warehouse on the plot.
After GST was introduced in 2017, tax authorities began treating such transfers as a taxable service and issued showcause notices demanding 18 per cent GST.
Companies and the Gujarat Chamber of Commerce and Industry challenged these notices.
They argued that transferring full leasehold rights was essentially the sale of an interest in land, which is treated as an immovable property and is specifically kept outside GST, according to Schedule III of the Central GST Act. Stamp duty is already paid on such transfers, and hence charging GST would amount to double taxation.
In January last year, the Gujarat High Court accepted the taxpayers’ argument. It ruled that when a lessee completely transferred the long-term lease rights and stepped out of the picture, the transaction was a transfer of an immovable property and not a “supply of service”. Therefore, GST does not apply. 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 a legal route to seek the apex court’s permission to appeal.
“The Supreme Court has settled the issue for leasehold rights of industrial plots in Gujarat. Companies that had received tax demands for transferring leasehold rights will no longer have to pay the 18 per cent GST on those transactions. It also reinforces the principle that pure transfers of long-term leasehold rights in land are not taxable under GST, though the ruling is fact specific,” said Rastogi.
[The Business Standard]
