Levy of GST on Immovable Property – Emerging Judicial Perspective Development Rights, Leasehold Rights, etc

The judicial forums have settled the issue and it is no more res integra that land consists of multiple rights and benefits arising out of land such as development right, leasehold right, etc shall also be considered as “immovable property”.

In the erstwhile regime transfer of “immovable property” was categorically outside the ambit of the definition of ‘service’¹, however, there is such no specific exclusion for “immovable property” under GST Law.

Schedule III of the CGST Act excludes only land & building and not the entire gamut of immovable property from the ambit of GST.

VIEW OF LAWMAKERS

It is important to note that the GST Council is of the firm view that there is no constitutional embargo to levy GST on transactions of land & building as the definition of ‘service’ under the Constitution of India is very wide. Although, the discussion of GST Council is only restricted to land & building, however, it is clear that GST Council is of the view that levy of tax on supply of immovable property is within the purview of GST.

JUDICIAL PERSPECTIVE

Interestingly, despite the limited exclusion under Schedule III, the judicial forums are emerging with the view point that “immovable property” is outside the ambit of GST as can be seen from the following judgements:

I. Gujarat Chamber of Commerce and Industry²
a. In the said matter the Hon’ble Gujarat High Court has held that the transfer of leasehold rights being an “immovable property”, are not considered a “supply of service” under the GST Act and consequently, GST is not applicable to these transactions.

II. The Hon’ble Gujarat High Court has held similar view in the matters of Kabir Instrument and Technology³, Alfa Tools Private Limited⁴ and Saurashtra Tin And Metal Industries⁵.

III. IV. Nirmal Lifestyle Developers Private Limited⁶
a. In the said matter, the Hon’ble Bombay High Court considering the following prima facie submission has granted the interim relief and admitted the Writ Petition:

4. ….. The Gujarat High Court came to the conclusion that the assignment was actually a transfer of immovable property and hence not exigible to GST. In the present case, in fact it is the case of the Petitioner that there is no transfer at all. Even if one would assume that there is a transfer, the same would be of immovable property and not taxable under the GST Law. We, therefore, find that a prima facie case for interim relief is made out.

Similarly, in the matter of Manohar Khetwani⁷, the Hon’ble Bombay High Court has given interim relief and admitted the Writ Petition.

AUTHOR’S NOTE

Considering the emerging judicial view point on levy of GST on immovable property, it will be intriguing to see the judicial standpoint on following questions of law:

i) Whether the Government has power under Article 246A to levy GST on supply of immovable property?

ii) Whether immovable property is included in the definition of ‘service’ as defined under the Constitution of India & CGST Act?

iii) If the above two questions are answered in the affirmative, whether transfer of immovable property is kept outside the purview of GST Law?

References:

1. Section 65B (44) of the Finance Act 1994
2. 2025 (1) TMI 516 – Gujarat High Court
3. Kabir Instrument and Technology
4. Alfa Tools Private Limited
5. Saurashtra Tin And Metal Industries
6. Nirmal Lifestyle Developers Private Limited
7. Manohar Khetwani

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