Govt plans SLP against Gujarat High Court GST ruling on leasehold transfers

The finance ministry is considering a special leave petition (SLP) in the Supreme Court against the Gujarat High Court’s ruling on the non-applicability of goods and services tax (GST) to transfers of leasehold rights, said a government official.

 

The High Court in January had ruled that GST did not apply to the transfer of leasehold rights to a third party for land granted by the Gujarat Industrial Development Corporation (GIDC).

 

The decision — in the case of Suyog Dye Chemie vs Union of India — relieved many companies of demands for 18 per cent GST on lease transfers, amounting to liabilities of around ₹8,000 crore in Gujarat and Maharashtra.

 

The core legal issue under scrutiny was whether GST should be levied on transfers of leasehold or industrial land, given that these transactions are subject to state-imposed stamp duty.

 

The high court accepted the petitioners’ argument that such transfers should be treated as sales of land, which are excluded from GST.

 

“There could be potential revenue loss to the government from the Gujarat High Court’s ruling. We are in the process of filing an SLP against the court’s order. There are similar cases pending in other courts, including the Bombay High Court. We are keeping that in mind,” the official said.

 

Commenting on this, Mayank Jain, partner with Khaitan & Co, said a challenge to the order of the Gujarat High Court would worry taxpayers facing similar demands. 

 

“The Supreme Court should address this dispute on priority and not leave it to be a situation similar to that of Safari Retreats, which has been legislatively overruled by way of a retrospective amendment,” he added.

 

The GST framework does not apply to the sale of land and buildings, says Abhishek Rastogi, founder of Rastogi Chambers.

 

“Any deviation from this exclusion could result in tax cascading and double taxation,” he added. 

In court’s view

> The HC had ruled that GST does not apply to leasehold rights transfers from the Gujarat Industrial Development Corporation 

> It accepted the petitioners’ argument that such transfers should be treated as sales of land, which are explicitly excluded from GST

> The ruling has relieved firms from facing ₹8,000 cr GST demands 

> There are similar cases pending in other courts, including the Bombay High Court

> Officials express concern over potential revenue loss and the implications for similar cases