Authorities Issues New Notice For GST on Transfer of Leasehold Land

                The issue of tax implications of transferring leasehold land has come to the fore once again as the authorities have started to issue 
notices to recover dues for such a transfer. This has sparked a significant debate among industry stakeholders as it is expected to 
have a major impact on future transactions and the broader real estate market.

The Goods & Services Tax (GST) authorities have recently issued these notices concerning the transfer of leasehold land. The crux of 
the issue lies in whether the transfer of leasehold land constitutes a sale of land or a service.

According to the tax authorities, such transfers qualify as a service, subjecting them to an 18% GST. This tax is levied in addition to the 
stamp duty already imposed by respective state governments, adding a financial burden to these transactions.
In India, industrial development corporations and other governmental bodies often transfer land parcels on a leasehold basis. These 
leasehold lands are sometimes sold by the original leaseholder to a new party.
The key question that has arisen here is whether these transactions should be treated as a sale of land, which is traditionally exempt 
from GST, or as a service, thereby attracting the 18% tax.

“Hypothetically, if GST is made applicable on these transactions, then there will be a dual levy of stamp duty and GST on the same 
transaction, thereby leading to tax cascading by way of double taxation on the same supply. This is against the conceptual framework 
of GST,” explained Abhishek A Rastogi, founder of Rastogi Chambers, who has already moved to the court in Maharashtra, for testing 
the constitutional validity of GST applicability on these transactions.
Tax experts argue that the transfer of leasehold land is akin to the sale of land and should not be taxed under GST. They believe that 
since the leasehold interest in the land is being transferred, it should be viewed as a sale of immovable property, which is not within the 
GST's purview. However, the tax authorities maintain that these transactions represent the transfer of leasehold rights, classifying 
them as a service that is subject to GST.

This dispute has significant implications for businesses and individuals involved in such transactions, as the additional GST could 
increase the cost of acquiring leasehold land and ultimately homebuyer who may have to bear the burden of higher project cost.
Some of these notices are issued now to ensure that the demands do not become time barred and that these are within the period of 
limitation. However, the outcome of this issue is likely to set a precedent for how similar transactions are treated under the GST regime 
in the future.



Source : The Economic Time