A recent Gujarat High Court ruling exempting goods and services tax on assignment of leasehold rights for industrial plots developed by Gujarat Industrial Development Corporation is expected to reduce the tax burden on businesses and real estate developers.
The ruling is poised to support smoother transactions and potentially boost investment in the industrial and commercial leasing market across India.
The judgment addresses the issue of whether the transfer of leasehold rights for GIDC plots qualifies as a ‘supply’ under the GST Act. The court ruled that such transactions represent the transfer of immovable property, not a service, and therefore fall outside the scope of GST.
This provides significant relief to businesses in sectors such as manufacturing, logistics and warehousing, where long-term leasehold rights are often assigned.
The exemption from GST removes an additional layer of financial and compliance burden, which has previously made such transactions more complex and costly.
“The judgment underscores the critical need for the GST Council to provide explicit guidelines on the taxation of immovable property transactions. Clear policy direction in this regard could significantly reduce litigation, enhance compliance and foster a uniform tax regime across states. While the decision may lead to short-term revenue setbacks for tax authorities, it remains consistent with the core principles of GST,” said Abhishek A Rastogi, founder, Rastogi Chambers.
According to him, an appeal to the Supreme Court is a likely next step, which could prolong broader policy reforms, but this ruling certainly sets a strong precedent in favour of taxpayers.
The Bombay High Court is scheduled to hear the matter on the similar issue this week.
“For real estate developers and businesses, this judgment offers a clearer, more predictable framework for structuring deals involving long-term leases of industrial plots. It is expected to stimulate growth in the industrial leasing sector, encouraging both domestic and international investments in key areas such as special economic zones (SEZs) and government-supported industrial parks,” said a real estate developer.
The Gujarat High Court’s ruling also clarifies the application of GST in the real estate sector by drawing parallels with the sale of land, which is explicitly excluded from GST under Schedule III of the GST Act. This sets an important legal precedent, reinforcing that leasehold rights—viewed as interests in immovable property—should not be taxed when transferred.
This judgment is expected to mitigate concerns over inconsistent tax treatment in real estate transactions, ultimately making the market more attractive and investor-friendly.
Overall, the decision marks a turning point for the Indian real estate sector, particularly in the industrial leasing segment.
Source Homevior.in
