The Rajasthan High Court has granted interim relief to a company challenging the levy of Goods and Services Tax (GST) on the premium paid for conversion of industrial land into commercial land allotted by the Rajasthan State Industrial Development and Investment Corporation (RIICO).
While directing the petitioner to deposit the conversion premium, the bench of Acting Chief Justice Sanjeev Prakash Sharma and Justice Bipin Gupta stayed the immediate payment of GST, observing that the issue requires detailed adjudication.
The dispute arose after RIICO demanded GST in addition to the premium payable for converting an industrial plot into commercial land. The petitioner did not dispute its liability to pay the conversion premium but challenged the levy of GST on such conversion.
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The petitioner argued that mere conversion of land from industrial use to commercial use does not amount to a taxable supply under the GST law. According to its submissions, GST under Schedule II of the CGST Act becomes applicable only where there is a lease or letting out of land or a building, including commercial or industrial complexes, for business or commerce. Simply changing the land-use category, it contended, does not trigger GST liability.
To support its case, the petitioner relied upon an order of the Delhi High Court dated 30 October 2025 in Mala Sahni Seth & Anr. v. Delhi Development Authority & Ors., where the Court had observed, in the context of freehold land, that GST would not be payable. The petitioner argued that a similar principle should apply to the present dispute concerning land conversion charges.
After hearing the submissions, the Rajasthan High Court issued notice to all the respondents.
The Court recorded the appearance of counsel for the Union of India, RIICO, and the State Government, who accepted notice on behalf of their respective authorities.
As an interim measure, the Bench directed the petitioner to deposit the conversion premium payable to RIICO. However, it clarified that the demand for GST would remain subject to the final adjudication of the writ petition.
The Court further ordered that the petitioner would not be required to pay the GST amount at this stage. At the same time, it protected the interests of the revenue by directing that if the Court ultimately upholds the GST levy, the petitioner would be liable to pay the tax along with applicable interest.
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