The Delhi High Court has granted interim protection to a taxpayer in a significant Goods and Services Tax (GST) dispute concerning the levy of GST on the transfer of leasehold rights in immovable property. 

The bench of Justice Anil Kshetrapal and Justice Shail Jain has restrained the tax authorities from taking any coercive action while it examines the larger legal question of whether such transfers are liable to GST under the Central Goods and Services Tax (CGST) Act, 2017. 

The petitioner/assessee challenged an Order-in-Appeal along with the corresponding summary issued in Form GST APL-04 on March 17, 2026. The petitioner sought quashing of the appellate order, contending that GST cannot be levied on the transfer of leasehold rights in immovable property. 

Buy Now: GST Judgements E-Compilation – June 2026

The principal issue before the Court is: Whether the transfer of leasehold rights in immovable property constitutes a taxable “supply” under the CGST Act, 2017, or whether it is excluded from GST as a transaction relating to the sale of land.

This question has significant implications for taxpayers dealing with long-term leasehold interests, industrial plots, commercial properties, and government lease transactions.

The petitioner argued that although Section 7 of the CGST Act defines “supply” broadly and specifically includes transactions such as rental, lease, tenancy, easement, and licence to occupy land, the Act also contains important exclusions.

According to the petitioner Section 7(2)(a) read with Entry 5 of Schedule III excludes the sale of land from the scope of “supply.” The expression “sale” of immovable property must be interpreted in accordance with Section 54 of the Transfer of Property Act, 1882. A transfer of leasehold rights substantially amounts to a transfer of an interest in land and therefore should not attract GST. 

The petitioner relied heavily on the Gujarat High Court’s decision in Gujarat Chamber of Commerce and Industry v. Union of India & Others (2025 SCC OnLine Guj 537), where the Court held that GST is not payable on the transfer of leasehold rights.

The Delhi High Court was informed that the Gujarat decision is presently under challenge before the Supreme Court through a Special Leave Petition (SLP). The Allahabad High Court and the Bombay High Court have also adopted the same view, thereby indicating growing judicial consensus on the issue. 

Considering the legal controversy and the existence of favourable High Court precedents, the Delhi High Court directed both parties to file written submissions, limited to five pages each, before the next hearing.

Importantly, the Court ordered that no coercive steps shall be taken against the petitioner until further orders. The matter has been listed for further hearing on August 3, 2026.

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