The Supreme Court of India has decided to examine whether the transfer of lease-hold rights constitutes a taxable supply under the Goods and Services Tax (GST) regime by clubbing together multiple cases pertaining to the same issue for joint hearing.
The order was given by the Apex Court after admitting a Special Leave to Appeal filed by the Union of India and the Office of Superintendent of CGST and C Ex, impugning the final judgment passed by the Gujarat High Court in Alfa Tools Private Limited vs. Union of India (SCA No. 12047/2024).
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The dispute originated when Alfa Tools Pvt. Ltd., a manufacturer of cutting tools, assigned its leasehold rights in an industrial plot allotted to it by the Gujarat Industrial Development Corporation (GIDC) to Beta Poly Plast Pvt. Ltd. for a consideration of ₹75 lakh, through a Deed of Assignment dated March 28, 2018.
GIDC had originally granted a 99-year lease to Alfa Tools in 1978. After holding the plot for over 39 years, Alfa Tools assigned its leasehold rights to Beta Poly Plast Pvt. Ltd. with the approval of GIDC. The petitioner later applied for cancellation of its GST registration, which was granted by the Commercial Tax Officer on January 18, 2021.
More than three years later, the petitioner received a letter from the tax authorities demanding GST on the consideration received under the lease assignment. Subsequently, a show cause notice (SCN) dated July 11, 2024 was issued, prompting Alfa Tools to approach the Gujarat High Court.
During the course of submissions, senior advocate Mr. S.N. Soparkar, appearing for the petitioner on behalf of Monaal J. Davawala submitted that the question of levy of GST on such transactions were already concluded in favour of the assessee through the judgment in Gujarat Chamber of Commerce and Industry Vs. Union of India (2025).
It was contended that Gujarat Chamber of Commerce (supra) had solidified that transfer of leasehold rights amounts to the transfer of immovable property and does not qualify as a “supply” under Section 7 of the CGST Act.
He further submitted that the SCN was barred by limitation under Section 73(10) and that the extended limitation under Section 74 was inapplicable in the absence of fraud or suppression.
The Division Bench of Justice Bhargav D. Karia and Justice D.N. Ray, after examining the Deed of Assignment, relied on Gujarat Chamber of Commerce (supra) to hold that the transaction constituted a transfer of immovable property, and was thus, outside the scope of GST.
The Court also found the impugned SCN to be ex-facie time-barred and thus quashed the impugned SCN and allowed the petition.
Aggrieved, the Revenue approached the Supreme Court through the present SLP.
The matter came up on August 1, 2025 before the Bench of Justice Pankaj Mithal and Justice Prasanna B. Varale.
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Additional Solicitor General N. Venkataraman, appearing for the petitioners, submitted that the Gujarat High Court’s judgment in Alfa Tools was entirely based on the ruling in Gujarat Chamber of Commerce and Industry, which was now under challenge through Diary No. 33270 of 2025.
Noting the overlap of legal issues, the Supreme Court ordered that both matters be heard together, for a consolidated adjudication on the question of whether the transfer of leasehold rights attracts GST.
Consequently, the apex court directed that the matter be listed along with the pending challenge to the Gujarat High Court’s earlier decision in Gujarat Chamber of Commerce and Industry vs. Union of India.
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