No GST on assignment of leasehold rights in land and building – Supreme Court dismisses Department’s appeal

The Supreme Court of India has yesterday (21 July 2026) dismissed Revenue department’s appeal filed against the Gujarat High Court decision in case of Union of India and Anr. v. Gujarat Chamber of Commerce and Industry and Ors. in Diary No. 33270-2025, wherein the High Court had held that assignment of leasehold rights of the plot of land allotted on lease by Gujarat Industrial Development Corporation (GIDC) and building constructed thereon by the lessee or its successor (assignor) to a third party (assignee) on payment of lump-sum consideration is not liable to GST.

The High Court in its decision dated 3 January 2025 had observed that when the lessee-assignor transfers absolute right by way of sale/assignment of leasehold rights in favour of the assignee, the same shall be transfer of ‘immovable property’.

Setting aside the demand of GST, the High Court had noted that under the service tax provisions, even the development rights which are the benefits arising from land were not liable to tax. Observing that ‘leasehold right’ is a greater right and interest in land than ‘development right’, the High Court had held that the principle under the service tax regime would therefore continue to apply even under the GST regime, as the object of introduction of GST was to subsume the existing taxes.