The Gujarat High Court has quashed a GST demand raised against M/s Life Sciences Chemicals, holding that the transfer of leasehold rights in an industrial plot is not taxable under the Goods and Services Tax regime.
The bench of Justice Bhargav D. Karia and Justice D.N.Ray has clarified that the transfer of leasehold rights in an industrial plot is equivalent to the “sale of land,” which is expressly exempt under Entry 5 of Schedule III of the CGST Act, 2017.
The case revolved around the transfer of leasehold rights of industrial land initially held by a partnership firm and later transferred to a sole proprietorship under the same name—M/s Life Sciences Chemicals. The GST authorities had issued a demand of ₹8.54 lakh, treating the lease assignment as a taxable supply under Section 74 of the CGST Act, 2017.
The petitioner, Ms. Anishaben Sureshbhai Paneliya submitted that the transaction was effectively a transfer of immovable property (land), which, under Entry 5 of Schedule III of the CGST Act, is not a “supply” liable to GST. Further, the transaction was an internal restructuring—transforming a partnership to a sole proprietorship—and not a sale to a third party.
The petitioner argued that the transaction involved no third party and was merely an internal restructuring. The leasehold transfer was effectively a transfer of immovable property akin to a land sale. As per Entry 5 of Schedule III of the CGST Act, sale of land is neither a supply of goods nor services and is not subject to GST.
The court while relying on the earlier ruling in Gujarat Chamber of Commerce & Industry v. Union of India, reiterated that the transfer of leasehold rights in land is akin to a sale of immovable property and falls outside the GST net.
The Court stated that “assignment by sale and transfer of leasehold rights of land allotted by GIDC shall not be subject to GST. The provisions of Section 7(1)(a), Schedule II, and Schedule III do not apply in such cases.”
The court quashed the GST demand order, the show cause notice dated 26.07.2024, and the circular relied upon by the department—Circular No. 44/18/2018-CGST dated 02.05.2018.
Case Details
Case Title: M/S LIFE SCIENCES CHEMICALS Versus UNION OF INDIA & ORS.
Case No.: R/SPECIAL CIVIL APPLICATION NO. 2086 of 2025
Date: 30/04/2025
Counsel For Petitioner: Hardik V Vora
Counsel For Respondent: GOVERNMENT PLEADER
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