GST on Real Estate: Leasehold Transfers & Going Concern Exemptions in 2025

The rulings also clarify that stamp duty and capital gains tax may still apply to leasehold transfers, even though GST does not. This underscores the need for holistic tax planning, where businesses and individuals must evaluate the interplay between GST, stamp duty, and income tax implications. The Gujarat High Court’s emphasis on the substance over form principle means that documentation and transactional intent must align with the economic reality to avoid disputes. For 2025-2026, these distinctions will remain central to compliance, particularly as real estate transactions grow more complex with hybrid models (e.g., leasehold-to-freehold conversions or partial project sales).

In 2025, the treatment of GST on real estate transactions and leasehold rights has been clarified through key judicial and regulatory rulings, particularly in Gujarat. The Gujarat High Court has held that the transfer of leasehold rights in industrial plots, such as those under GIDC (Gujarat Industrial Development Corporation), constitutes a transfer of immovable property rather than a supply of service. This distinction is critical, as it means such transactions are outside the scope of GST, which applies only to supplies of goods or services. The Court’s reasoning hinges on the nature of leasehold rights as a form of interest in land, aligning with established principles of property law.

Additionally, the Gujarat Authority for Advance Rulings (AAR) has reinforced that the transfer of an entire construction project as a slump sale—such as RDB Realty’s Surat housing project valued at ₹60 crore—qualifies as a transfer of a going concern, making it exempt from GST. This exemption applies when the transaction involves the sale of a business as a whole, including assets and liabilities, without interruption to its operations. The ruling underscores that such transfers are not merely property sales but involve the continuation of an economic activity, warranting GST exemption under the going concern principle.

These developments collectively clarify two pivotal aspects of GST on real estate transactions and leasehold rights:
– Leasehold transfers (e.g., GIDC plots) are treated as immovable property, not taxable under GST.
– Slump sales of projects as going concerns are GST-exempt, provided they meet the criteria of a complete business transfer.

For stakeholders in Gujarat and beyond, these rulings provide certainty in structuring transactions, ensuring compliance while avoiding unnecessary GST liabilities. The decisions reflect a nuanced understanding of real estate transactions, balancing taxability with the economic substance of property and business transfers. As of 2025, these precedents remain authoritative for similar cases, pending further legislative or judicial interventions.

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