Supreme Court Rules GST Not Applicable on Lease Transfers

The Supreme Court definitively ruled on July 21, 2026, that Goods and Services Tax (GST) is inapplicable to the transfer of long-term leasehold rights for industrial plots. This decision dismisses the Centre's appeals against a Gujarat High Court judgment from January 2025. The apex court's bench, comprising Justices Pamidighantam Sri Narasimha and Alok Aradhe, noted this was the second instance of rejecting the Revenue's plea on this matter.

This landmark ruling provides much-needed finality for industrial units in Gujarat, which had been subjected to significant tax demands since the introduction of GST in 2017. Tax authorities had attempted to levy 18 percent GST on the transfer of GIDC lease rights, often held for 99 years. These transfers, where original allottees sell their lease rights after constructing facilities, were challenged by companies and the Gujarat Chamber of Commerce and Industry.

Taxpayers successfully argued that such transfers constitute a sale of interest in immovable property, which is explicitly excluded from GST under Schedule III of the CGST Act. They also pointed out that paying stamp duty on these transactions meant GST would lead to double taxation. The Gujarat High Court in January 2025 agreed, classifying these complete transfers as a disposition of immovable property rather than a taxable service.

With the Supreme Court's confirmation, companies that had paid GST on these leasehold right transfers are now entitled to claim applicable refunds. This judgment clarifies the tax treatment for similar transactions nationwide, reinforcing that pure transfers of long-term leasehold rights in land are not subject to GST.