M/S. Siemens Ltd. Through Authorised ... vs Union Of India on 21 November, 2025
AI Legal Insights
This GST case law from the Gujarat High Court addresses whether the assignment of a 99-year leasehold right in industrial land is subject to GST under Section 7(1)(a) of the CGST Act, 2017. The Court considered whether such an assignment constituted a 'supply of service' or a transfer of immovable property. The petitioner, M/s. Siemens Ltd., challenged a show cause notice issued under Section 74. Ultimately, the High Court ruled in favor of the petitioner, concluding that the assignment was a transfer of immovable property and not subject to GST, quashing the notice.
This case clarifies the GST implications of long-term lease assignments of industrial land. It provides relief to taxpayers involved in such transactions by confirming that these assignments are not subject to GST, preventing potential tax demands and litigation.
- Assignment of 99-year leasehold rights in land is a transfer of immovable property.
- Transfer of immovable property is outside the scope of GST under the CGST Act, 2017.
- Section 74 show cause notice quashed as assignment isn't a 'supply of service'.
- GIDC-allotted industrial land lease assignments not subject to GST.
- Approvals from GIDC for lease assignments are key to establishing the nature of the transaction.
QIs GST applicable on transfer of land?
Generally, the sale of land is considered a transfer of immovable property and is not subject to GST under the CGST Act, 2017. This is because land is not classified as either goods or services under the GST law.
QWhat is the GST rate on lease of land?
The GST rate on the lease of land depends on the specific nature of the lease and the activities conducted on the land. If the lease involves the provision of services or construction, GST may be applicable at rates applicable to those specific services.
Ruling Summary
1. Outcome
The High Court of Gujarat allowed the petition, quashing and setting aside the impugned show cause notice dated 15.09.2025 issued under Section 74 of the CGST Act, 2017. The Rule was made absolute.
2. Core Issue
The core issue was whether the assignment/transfer of long-term (99-year) leasehold rights in industrial land (originally allotted by GIDC) by the petitioner to a third party constitutes a "supply of service" liable to Goods and Services Tax (GST) under Section 7(1)(a) of the Central Goods & Service Tax Act, 2017, or if it amounts to a transfer of "immovable property" falling outside the ambit of GST.
3. Key Facts
* Gujarat Industrial Development Corporation (GIDC) had originally allotted two land parcels in Halol, Gujarat, on a 99-year lease from 20.01.1985 to Hindustan Motors Limited (HML).
* HML subsequently assigned these leasehold rights to M/s. Siemens Ltd. (the petitioner) through two Deeds of Assignment in 2011.
* With GIDC's approval, Siemens then assigned these leasehold rights, along with certain structures and movable assets, to M/s. LM Wind Power Blades India Private Limited through two separate Deeds of Assignment dated 04.07.2019 and 06.08.2019.
* Siemens received a total consideration of Rs.193,50,00,000/- for transferring these leasehold rights.
* The petitioner received a letter dated 14.06.2025 from the Superintendent, CGST & CE, directing them to furnish documents and proof of GST payment on this consideration.
* Siemens responded on 04.07.2025, raising jurisdictional objections, contending that the issue was settled by the Gujarat High Court's judgment in Gujarat Chamber of Commerce, Industries & Ors. v. Union of India & Ors.
* Despite the objection, a Show Cause Notice (SCN) dated 15.09.2025 was issued under Section 74 of the CGST Act, 2017, demanding Rs.34,83,00,000/- as GST on the transfer of leasehold rights, treating it as a taxable supply of service under Section 7(1)(a) and classified under Heading 9972.
4. Arguments (Taxpayer vs Revenue)
* Taxpayer (M/s. Siemens Ltd.):
* The issue is res integra (settled law) based on the Gujarat High Court's decision in Gujarat Chamber of Commerce, Industries & Ors. v. Union of India & Ors. (Special Civil Application No. 11345 of 2023).
* The transfer of leasehold rights is akin to the sale of land and constitutes a transfer of "immovable property," which falls outside the scope of "supply of service" under Section 7(1)(a) read with Clause 2 and 5 of Schedule II of the CGST Act and is specifically excluded by Clause 5 of Schedule III.
* Revenue (Union of India & Ors.):
* The Show Cause Notice treated the assignment of leasehold rights as a "supply of service" taxable under Section 7(1)(a) of the Act, classified under Heading 9972.
* The execution deed and subsequent lease were considered a taxable supply of service.
* The Revenue's counsel, Ms. Nidhi Vyas, was unable to controvert the proposition that the issue was covered by the Gujarat Chamber of Commerce decision. The court also noted, with disapproval, that an SLP filed against the said decision was still in the diary stage without efforts for circulation.
5. Court’s Reasoning
The High Court heavily relied on and reiterated its previous decision in Gujarat Chamber of Commerce, Industries & Ors. v. Union of India & Ors., holding that:
* There is a distinction between the initial allotment of land on a long-term lease by GIDC (which is a supply of service) and the subsequent transfer/assignment of such leasehold rights by the lessee-assignor to a third party.
* The transfer of long-term leasehold rights (e.g., 99 years) for a premium is akin to an alienation of "immovable property." Such leasehold rights are an interest in immovable property and cannot be separated from the immovable property itself.
* Section 105 read with Section 108(j) of the Transfer of Property Act indicates that such an assignment extinguishes the transferor's estate and severs their legal relationship with the original lessor, making the assignee the new lessee.
* Clause 5 of Schedule III of the CGST Act explicitly excludes the "sale of land" from being treated as a supply of goods or services. The assignment of long-term leasehold rights is considered analogous to the sale of land and, therefore, falls outside the GST ambit.
* The legislative intent, as evidenced by the definition of "service" under the erstwhile Service Tax regime (Section 65B(44) of the Finance Act, 1944) and the minutes of the 5th and 7th GST Council meetings, consistently indicated that the transfer of immovable property (including development rights and leasehold rights) was not intended to be taxed under GST.
* The transaction involved the transfer of the entire land along with the constructed building, which is a "capital asset in form of an immovable property" and "profit a pendre," thus not subject to GST.
* Therefore, the assignment by sale and transfer of leasehold rights of land and building constitutes a transfer of "benefits arising out of immovable property" and is not subject to GST under Section 9 of the CGST Act. Section 7(1)(a) read with Clause 5(b) of Schedule II and Clause 5 of Schedule III would not apply to such transactions.
6. Statutory References
* Constitution of India: Articles 226, 227
* Central Goods & Service Tax Act, 2017 (CGST Act):
* Section 2(119) (Definition of "works contract")
* Section 2(102) (Definition of "service")
* Section 7(1)(a) (Scope of supply)
* Section 9 (Levy and collection)
* Section 11 (Power to grant exemption from tax)
* Section 15 (Value of taxable supply)
* Section 16 (Eligibility and conditions for taking input tax credit)
* Section 17(5)(c) and (d) (Apportionment of credit and blocked credits)
* Section 74 (Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any willful misstatement or suppression of facts)
* Schedule II, Clause 5(a) (Renting of immovable property)
* Schedule II, Clause 5(b) (Construction services)
* Schedule III, Clause 5 (Sale of land and building)
* Integrated Goods and Service Tax Act, 2017 (IGST Act):
* Section 12 (Place of supply of services where location of supplier and recipient is in India)
* Section 2(120) (Definition of "service" from CGST Act applied to IGST Act)
* Gujarat Industrial Development Act, 1962
* Transfer of Property Act: Section 105 (Lease), Section 108(j) (Rights and Liabilities of Lessor and Lessee)
* Finance Act, 1944 (Service Tax regime): Section 65B(44) (Definition of "service")
* Notification No. 11/2017-Central Tax (Rate) (GST rates on construction services, specifically Heading 9954)
7. Precedents Cited
* Gujarat Chamber of Commerce, Industries & Ors., v. Union of India & Ors., Special Civil Application No. 11345 of 2023 (Gujarat High Court) - Primary Precedent
* Gopal Saran v. Satya Narayana (1989) 3 Supreme Court Cases 56 (Supreme Court)
* Byramjee Jeejeebhoy (P) Ltd vs State Of Maharashtra AIR 1965 Supreme Court 590 (Supreme Court)