GIDC Leasehold Rights Assignment Not Taxable as Immovable Property Transfer: GSTAT Surat

Assistant Commissioner of CGST & Central Excise Vs Pragna Chemical Industries (GSTAT Surat)

Summary: The Goods and Services Tax Appellate Tribunal, Surat, dismissed the departmental appeals concerning GST demanded from assignees of leasehold rights in GIDC industrial plots under the reverse charge mechanism. It upheld the Orders-in-Appeal which had set aside the demands by following the Gujarat High Court’s judgment in Gujarat Chamber of Commerce and Industry v. Union of India. The Tribunal also corrected erroneous departmental cause titles appearing on the GSTAT portal; the supplied table identifies proceedings involving Pragna Chemical Industries and Shivabhishek Industrial Park Pvt. Ltd.

Taking the facts from Appeal No. APL/SRT/059/2026, the Tribunal recorded that GIDC had allotted Plot No. 7311 at Ankleshwar in 1990. The Central Excise and Customs department subsequently attached the property to recover the Central Excise and Service Tax dues of Tulsi Alloys Pvt. Ltd. At the departmental e-auction conducted through MSTC Ltd. on 26 April 2018, Raj Enterprise became the successful bidder and subsequently nominated Pragna Chemical Industries as the transferee. The source records a GIDC transfer order dated 24 January 2019 and an agreement between Raj Enterprises and Pragna Chemical Industries dated 5 March 2019. A show cause notice alleged deliberate withholding of information about a taxable service. The adjudicating authority confirmed tax and interest and imposed a penalty equal to the tax under Section 74(1) and a further equal penalty under Section 122(2)(b) of the CGST Act, 2017. The first appellate authority set aside the demand.

The departmental representative submitted that the appeals had been filed because the Revenue had challenged the Gujarat High Court judgment before the Supreme Court. Although the special leave petitions had since been dismissed, the department stated that it was preparing a review petition. Pragna Chemical Industries contended that the Gujarat High Court judgment continued to prevail and bind the Tribunal. GSTAT found it undisputed that the transactions were covered by that judgment. The reproduced High Court reasoning treated assignment by sale and transfer of GIDC leasehold rights for consideration as transfer of benefits arising out of immovable property, outside the levy considered under Section 7(1)(a) read with clause 5(b) of Schedule II, clause 5 of Schedule III and Section 9 of the CGST Act, 2017.

The Tribunal also referred to Aerocom Cushions Private Limited v. Assistant Commissioner (Anti-Evasion), Nagpur, in which the Bombay High Court adopted the Gujarat High Court’s view, and reproduced the Supreme Court’s orders dismissing the Revenue’s challenges in the Aerocom Cushions proceedings on 22 May 2026 and the Gujarat Chamber of Commerce proceedings on 21 July 2026. It held that GST was not leviable on the transactions in question. Consequently, whether Sections 74 and 122(2)(b) were rightly invoked and whether reverse charge applied did not survive for separate consideration. The departmental appeals were dismissed and the Orders-in-Appeal upheld; the operative part was pronounced on 29 September 2026.

Cases Discussed

• Union of India & Anr. v. Gujarat Chamber of Commerce and Industry & Ors. — SLP (Civil), Diary No. 33270/2025, order dated 21 July 2026 (Supreme Court of India). The Tribunal reproduced the order dismissing the special leave petitions in view of the earlier dismissal of a similar SLP.
• Assistant Commissioner (Anti Evasion) & Anr. v. Aerocom Cushions Private Limited — SLP (C) No. 18772/2026, order dated 22 May 2026 (Supreme Court of India). The Supreme Court declined interference with the Bombay High Court judgment and dismissed the special leave petition; the order was reproduced by the Tribunal.
• Aerocom Cushions Private Limited v. Assistant Commissioner (Anti-Evasion), Nagpur — 2026:BHC-NAG:348-DB, judgment dated 9 January 2026 (Bombay High Court, Nagpur Bench). The High Court agreed that assignment of GIDC/MIDC leasehold rights for consideration constitutes transfer of benefits arising from immovable property and is not subject to GST.
• Gujarat Chamber of Commerce and Industry & Ors. v. Union of India & Ors. — R/Special Civil Application No. 11345 of 2023, judgment dated 3 January 2025 (Gujarat High Court). The jurisdictional High Court’s ruling on non-leviability of GST on assignment of GIDC leasehold rights governed the transactions before the Tribunal.

FULL TEXT OF THE ORIGINAL GSTAT ORDER SURAT

1. 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 vs. UOI (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:

3. For convenience, the facts are taken from the Appeal No. APL/SRT/059/2026 (Commissioner of CGST, Vadodara-II vs. 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,

(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, 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 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-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 Private Limited vs. Assistant Commissioner (Anti-Evasion), Nagpur [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 (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 (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 SLP (C) No. 18772/2026.

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 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.

(Operative part of the order pronounced in open court on 29th September 2026).