2026 (1) TMI 1335 - HC - GST

GST refund on leasehold transfer: assignment treated as nonsupply, refund to be paid within two weeks after application.

Assignment of leasehold rights for consideration is treated as transfer of benefits arising from immovable property and therefore falls outside the ... Refund Claim - Levy of GST on transfer of immovable property - Assignment and transfer of leasehold rights not amounting to supply - Deficiency Memo in Form RFD-03 - refund of tax u/s 54 - scope of supply u/s 7(1)(a) - entry in Schedule - entitlement to refund of the tax paid on leasehold transfer - HELD THAT:- It is the case of the petitioner that M/s. Dayaram Pharma Chem obtained the Final Transfer Order to sale the said plot from GIDC and the same was sold to the petitioner under an agreement dated 19.07.2024. The petitioner paid the total amount in two installments. It is further the case of the petitioner that this Court in case of Gujarat Chamber of Commerce v. Union of India [2025 (1) TMI 516 - GUJARAT HIGH COURT] has held that the assignment by sale and transfer of leasehold rights of the plot allotted by GIDC to the lessee in favour of the third party assignee for a consideration shall be an assignment/sale/transfer of benefits arising out of “immovable property” by the lessee-assignor in favour of the third party-assignee which would become the lessee of GIDC in place of the original allottee-lessee. Thus, in such circumstances, the provisions of Section 7(1)(a) of the Central Goods and Services Tax Act, 2017 (“GST Act”) providing for scope of supply read with Section 5(b) of Schedule II and clause 5 of Schedule III would not be applicable to such transaction of assignment of leasehold rights of land and building and the same would not be subject to levy of GST as provided u/s 9 of the GST Act. Thereafter, the petitioner applied for refund of the tax paid on the said leasehold transfer under Section 54 of the GST Act. However, respondent no. 3 issued Deficiency Memo in Form RFD-03 on the ground that the supporting documents are not legible and in addition it was stated that there is no notification or circular published by the GST Council regarding refund of GST paid on lease transaction. Respondents has tendered communication dated 22.1.2026 received from the office of Deputy Commissioner of State Tax, Range-14 Bharuch, and the same is taken on record. At the outset, learned Assistant Government Pleader, submitted that as and when the application is filed by the petitioner for refund of the tax amount paid by the petitioner, the same will be considered and refund will be paid to the petitioner. Thus, the petitioner shall make an application seeking refund of the amount and in case such application is made by the petitioner, the amount of refund shall be paid to the petitioner within a period of two weeks from the date of receipt of such application. Issues: Whether the petitioner is entitled to refund of GST paid on assignment/transfer of leasehold rights in land and whether the refund application should be considered and paid in accordance with the Court's earlier decision in Gujarat Chamber of Commerce and Industry v. Union of India.Analysis: The petition challenges Deficiency Memos refusing the refund claim and relies on the High Court's prior decision holding that assignment/transfer of leasehold rights in land constitutes sale/transfer of immovable property and does not amount to supply liable to GST. The respondents have communicated that on filing an application for refund the claim will be considered and refund paid. The Court directs the petitioner to file the refund application and requires the tax authority to process and pay the refund within two weeks of receipt, thereby operationalising the legal position reflected in the earlier decision.Conclusion: The petitioner is entitled to have the refund application considered and the refund paid; on filing the application the refund shall be paid within two weeks. The petition is disposed accordingly.Final Conclusion: The order implements the entitlement of the petitioner to obtain refund in line with the earlier decision that assignment/transfer of leasehold rights in land is akin to sale of immovable property and not a supply under the GST law, by directing prompt consideration and payment of the refund on filing of the application.Ratio Decidendi: Assignment or transfer of leasehold rights in land by the lessee to a third party is a transfer of benefits of immovable property equivalent to sale and does not constitute a taxable supply under the GST framework; accordingly refund of tax paid on such transactions is allowable and must be processed under Section 54 of the GST Act.