Indirect Tax Quarterly Milestones (January-March 2025)

Partner: Himanshu Sinha, Senior Associate: Samyak Jain, Associate: Advetita

Key Developments

Gujarat High Court holds that GST will not apply on the transfer or assignment of leasehold rights in industrial land

In a significant ruling, the Gujarat High Court held that leasehold rights of land and buildings transferred by the lessee (allottee) to a third party (assignee) under a long-term lease agreement with the Gujarat Industrial Development Corporation would not be subject to Goods and Services Tax (GST).¹

The Court clarified that the assignment by sale and transfer of leasehold rights of the plot of land by the lessee in favour of a third party-assignee for a consideration would be the assignment, sale, or transfer of benefits arising out of ‘immovable property’ by the lessee-assignor in favour of the third party-assignee, who will become the lessee in place of the original allottee-lessee. It was held that such a transaction of assignment of leasehold rights of land and building would not be subject to GST.

The Court reasoned that the assignment of leasehold rights involves an absolute transfer of rights in immovable property, which extinguishes the rights of the transferor and transfers them to the assignee. This transaction is akin to a sale or transfer of immovable property rather than a ‘service’ under the Central Goods and Services Tax Act, 2017 (CGST Act).

This decision is a major relief for industrial plot holders as it eliminates GST liabilities that could inflate transaction costs by 18%. Businesses can now plan expansions or restructurings with greater financial certainty, particularly in industrial hubs like Gujarat. This ruling may also set a precedent for similar transactions nationwide, encouraging policymakers to clarify GST applicability on immovable property transfers.

Delhi High Court holds that license fees collected by Electricity Regulatory Commissions would not be subject to GST

The Delhi High Court recently held that the regulation of tariff, inter-state transmission of electricity, and the issuance of licences by the Central Electricity Regulatory Commission (CERC) and the Delhi Electricity Regulatory Commission (DERC) would not be subject to GST.²

The Court noted that these activities do not fall within the ambit of ‘business’ under the CGST Act, as these are regulatory functions performed by CERC and DERC as part of their statutory obligations. The Court held that since the adjudicatory and regulatory functions have not been distinctly treated under the Electricity Act, 2003, the exemption extended to tribunals under the CGST Act would also extend to the commissions.

The exemptions validated by this judgment reduce operational costs for electricity sector stakeholders, particularly those involved in licensing and tariff approvals. Companies will be able to allocate resources more efficiently as a consequence.

Telangana High Court upholds validity of notifications issued under Section 168A of the CGST Act, extending the limitation period for certain proceedings on account of COVID-19

The validity of notifications issued under Section 168A of the CGST Act extending the timelines for passing adjudication orders has become a contentious issue, which has now reached the Supreme Court. This escalation follows conflicting decisions from various High Courts, necessitating a definitive resolution of this critical issue. Section 168A empowers the central government to extend timelines for actions hindered by force majeure events, provided there is a recommendation from the GST Council.

The Telangana High Court upheld the validity of these notifications, interpreting Section 168A’s language as sufficiently broad to encompass actions that could not be completed during the COVID-19 pandemic. It further held that the Supreme Court’s suo motu orders, which extended limitation periods across general and special laws during the pandemic, apply to adjudication proceedings under the CGST Act. The Allahabad and Patna High Courts have similarly affirmed the validity of the notifications, though their reasoning has differed.

Conversely, the Gauhati High Court ruled Notification No. 56/2023 ultra vires the CGST Act, citing the absence of a specific prior recommendation from the GST Council. This divergence in judicial interpretations has prompted the Supreme Court to agree to hear the Special Leave Petition filed against the Telangana High Court’s decision, setting the stage for a final resolution to this ongoing debate.

Clarification on procedure and various issues related to availing of benefits under Section 128A (Amnesty Scheme) of CGST Act

The Central Board of Indirect Taxes and Customs (CBIC) has issued further clarifications to address practical issues arising from the implementation of Section 128A of the CGST Act, 2017.³ This Section, introduced pursuant to the 53rd and 54th GST Council meetings, allows the waiver of interest, penalty, or both, on demands raised under Section 73 of the CGST Act for the period 1 July 2017 to 31 March 2020. This provision is significant for taxpayers as it offers financial relief by reducing the burden of additional costs on tax demands, thereby easing the economic impact of past dues pertaining to the initial GST implementation phase.

The CBIC has clarified that taxpayers who made payments before Section 128A came into force (i.e., before 1 November 2024) through FORM GSTR-3B, rather than through FORM GST DRC-03, would also be eligible to claim the benefit under Section 128A, provided the payment was intended towards the specified demand, subject to verification by the proper officer. However, payments made on or after 1 November 2024 must strictly follow the procedure laid down in Rule 164 of the Central Goods and Services Tax Rules, 2018, including the use of prescribed forms and crediting through the electronic liability register.

Further, where adjudication orders or appeals relate to both eligible and non-eligible periods, taxpayers can opt to avail of the benefit under Section 128A for the eligible portion (i.e., for financial years 2017-18, 2018-19, and 2019-20) by filing FORM SPL-01 or SPL-02, while continuing to pursue appeals for periods outside its scope. Appellate authorities have been instructed to pass separate orders accordingly.

Additionally, the CBIC has clarified that in cases where the tax amount has already been fully paid and the department has filed (or intends to file) an appeal solely on interest or penalty grounds (such as due to miscalculation or procedural issues), the benefit of Section 128A would still be extended to the taxpayer.⁴ The department has been directed to consider the withdrawal of such appeals to reduce unnecessary litigation and promote ease of compliance.

Central Board of Indirect Taxes and Customs extends transitional provisions for implementation of Sea Cargo Manifest and Transshipment Regulations

The CBIC has extending the compliance grace period for implementing the Sea Cargo Manifest and Transshipment Regulations, 2018 (SCMTR) until 31 May 2025.⁵ This extension comes as a final facilitation measure, allowing stakeholders additional time to adjust to the new requirements.

The SCMTR seeks to bring about transparency, predictability of movement, and advance information collection for faster customs clearance. These regulations stipulate the obligations and roles and responsibilities of the various stakeholders involved in the movement of imported and exported goods.

Under the transitional provisions these regulations stipulate, customs authorities have continued accepting the old formats for filing manifest declarations, giving sufficient time for phased compliance with the new formats under the SCMTR. The time limit has been extended after testing the filing of new formats under the SCMTR and accounting for the difficulties faced by the stakeholders in compliance.

This extension will incentivise shipping lines, freight forwarders, and transhippers to prioritise system integration and electronic filing in compliance with the SCMTR, helping them to avoid attracting penalties and business disruptions. It also reinforces CBIC’s approach of balancing compliance enforcement with facilitation measures for stakeholders.

[1] Gujarat Chambers of Commerce and Industry and Ors v Union of India and Ors, 2025 (1) TMI 516 (Guj.)

[2] Central Electricity Regulatory Commission v Union of India and Ors., 2025 (1) TMI 887 (Del.)

[3] Circular No. 248/05/2025-GST dated 27 March 2025

[4] Instruction no. 02/2025-GST dated 7 February 2025

[5] Circular No. 10/2025-Customs dated 28 March 2025

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