Gujarat HC demands justification from Gujarat government over 18% GST levied on sale of leasehold land in GIDC

A division bench headed by Justices Vipul Panchal and Dev Desai issued a notice to Gujarat government

Updated: Jul 7th, 2023


The Gujarat high court on July 6 demanded that the Gujarat government should explain the reasons for levying a goods and services tax (GST) at a rate of 18% on the amount for the transfer of a 99-year lease of land in Gujarat's industrial estates.

A division bench headed by Justices Vipul Panchal and Dev Desai issued a notice and ordered the Gujarat government to file a reply on the matter by July 20. The case will be resumed on July 20.

All about the GST petition filed by GCCI

The Gujarat Chamber of Commerce and Industries (GCCI) filed a petition on this matter, in which it was stated that the lease deed was executed at the very moment when the Gujarat Industrial Estate Corporation first allotted the land on lease, after which the lease rights had been transferred, and no new lease was executed after that. Therefore, because it is not a new lease, GST cannot be applied to it.

Since 2017, when the GST came into force, GIDC has issued notices to the transferors of lease rights in industrial estates across Gujarat with debts worth ₹17,000 cr.

They have been asked to pay 18% GST and a penalty for late payment. As a result, the lease buyers have to spend 30 to 35% more than the market price to buy the land.

 The GST conundrum

Since the department of GST has issued notices and created GST liability, disputes have also started to emerge between sellers and buyers. None of the parties is willing to accept the liability of paying GST now for transactions made six years ago. Hence, disputes between buyers and sellers have increased.

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