DDA Can't Prima Facie Levy GST On Conversion Of Property From Leasehold To Freehold: Delhi High Court

The Delhi High Court has prima facie observed that the Delhi Development Authority cannot levy GST on conversion of property from leasehold to freehold.A division bench of Justices Prathiba M. Singh and Shail Jain observed,“Prime facie, it clearly appears that conversion is nothing but a part of the process of sale of the immovable property by the DDA to purchasers and GST would not be liable to be charged on such conversion in terms of Section 7(2) of the CGST Act itself.”The bench also reasoned that Section 7(2) of the CGST Act exempts immovable property from the domain of supply of goods or services.Nonetheless, it has asked both DDA and the GST Department to seek instructions on the issue and file an affidavit by December 05.The development comes in a plea filed by persons claiming ownership of certain units in DLF South Court Mall at Saket. The same was purchased on leasehold basis in the year 2012 and in November of 2023, the Petitioners filed applications with DDA seeking conversion of the said Units from leasehold to freehold.The said applications were processed by the DDA and various charges were demanded, which were paid by the Petitioner. Later however, in April 2025, DDA raised demands levying GST on the previously paid conversion charges with retrospective effect.In doing so, the authority relied on Note 5 of the Standard Operating Procedure dated 28th March, 2025 where GST is being charged on alleged services for foregoing the future rent which would have been payable if the property was not converted from leasehold to freehold.The Petitioner argued that conversion of leasehold to freehold is nothing but a part of a process of sale of immovable property which would not attract GST and is exempted.Reliance was placed on the Supreme Court's decision in Estate Officer and Another v. Charanjit Kaur (2021) to argue that whenever any authority converts property from leasehold to freehold, it is a part of sale of immovable property and no service is being provided. The High Court at the outset observed that conversion of immovable property from leasehold to freehold is governed by the scheme of conversion, published by the DDA dated July 2016.Charges for the same were prescribed by DDA itself after the GST law came into effect but, there was no mention of GST being charged on foregoing of future lease hold amounts.In this backdrop, it held,“Prime facie, in the opinion of this Court, whenever any property is purchased initially, as per the policy, the property is given out on a leasehold basis for a particular period. The said purchaser or lessee thereafter pays conversion charges and the title in favour of the purchaser is merely affirmed by conversion of the property from leasehold to freehold. As held in the decision of the Supreme Court in Estate Officer and Another v. Charanjit Kaur (Supra), the process of conversion would merely be a part of the process of sale and conversion charges would be nothing more than consideration for sealing the sale in favour of the purchaser.”Appearance: Mr Sandeep Sethi, Sr. Adv., Mr. Saurabh Seth, Mr. Sukrit Seth & Ms. Aishwarya Modi, Advs. for Petitioner; Mr. Rajeev Lochan Mahunta, Mr. Sahil S Panwar, Mr. Bhanu Katyal & Mr. Pratyush Mishra, Advs. Ms. Anushree Narain, SSC for RespondentsCase title: Mala Sahni Seth & Anr. v. Delhi Development Authority & Ors.Citation: 2025 LiveLaw (Del) 1507Case no.: W.P.(C) 16214/2025Click here to read order

DDA Can't Prima Facie Levy GST On Conversion Of Property From Leasehold To Freehold: Delhi High Court

Kapil Dhyani

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