This brief expression of thoughts highlights and enumerates the basics of this one of the most contentious issues in the subject. Here, author has reproduced the provision of blocked credit and compiled a list of judicial discords pending relating to this very aspect across the various high courts of the country.
Section 17(5)(c) and 17(5)(d) of the CGST Act, 2017 govern the issues for Blocked Credit on Construction of Immovable Property.
1. What are the provisions of Section 17(5)(c) and 17(5)(d) of the CGST Act, 2017?
As per Sub Section 5 of Section 17 of CGST Act, 2017, Notwithstanding anything contained in sub-section (1) of section 16 and sub- section (1) of section 18, input tax credit shall not be available in respect of the following, namely:—
(c) works contract services when supplied for construction of an immovable property (other thanplant and machinery) except where it is an input service for further supply of works contractservice;
(d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services orboth are used in the course or furtherance of business.
Explanation.—For the purposes of clauses (c) and (d), the expression “construction” includes reconstruction, renovation, additions or alterations or repairs, to the extent of capitalization, to thesaid immovable property;
2. What is the view of courts/AAR on Blocked Credit on Construction of Immovable Property?
We can at the view of the court on Blocked Credit on Construction of Immovable Property specified in Section 17(5)(c) and 17(5)(d) of the CGST Act, 2017 by way of following cases:-
| S. No. | Case Name and Court | In Favor of | Question / Fact | Decision | Matter Pending or Decided |
| 1 | Safari Retreats (P.) Ltd. v. Chief Commissioner of Central Goods & Service Tax (Orissa High Court) | assessee | Where petitioner had not sold shops in mall but had let out same, petitioner was liable to pay huge amount of GST on rent received shall be entitled to take and utilize input credit tax charged on purchases made in construction. | If the assessee is required to pay GST on the rental income arising out of the investment on which he has paid GST, it is required to have the input credit on the GST, which is required to pay under section 17(5)(d). | Decided at High Court but SLP filed before Supreme Court (Which is Pending) |
| 2 | Hinganghat Integrated Textile Park Private Limited. v. Union of India and ors. (Bombay High Court) | Matter Pending | The challenge in the petition is to the provision of Section 17(5)(c) and 17(5)(d) of the Central Goods and Services Act 2017, on the ground of double taxation and being discrimination. It is the violation of Article 14 of the Constitution of India for the reason that though petitioner-Company is similarly situated with the other establish-ments, the credit of the input goods and services utilized for construction of malls to let it out on annual rent, is denied. | Court has read down the provision instead of writing it down and the petitioner therein is held entitled for credit of goods and services, input of goods and services in the process of construction of letting out of the malls.
Notice to the Attorney General of India, returnable on 16.12.2019. Issue Notice to the respondents, returnable on 16.12.2019. |
Pending
|
| 3 | Kamal Cogent Energy Private Limited. v. Union of India (Rajasthan High Court) | Matter Pending | Vires of Section 17(5)(c) and 17(5)(d) of the Central Goods and Services Act 2017 – double taxation – discrimi-nation | The respondents seek time to file reply. List again on 04.05.2020. | Pending
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| 4 | DLF Cyber City Developers Limited. v. Union of India and ors. (Punjab And Haryana High Court) | Matter Pending | Input tax credit – Scope of Section 17(5)(d) – construction of immovable property (shopping malls) intending for letting out for rent – Reliance upon the decision of ORISSA High Court in case of Safari Retreats (P.) Ltd. | It is made clear that in case the petition is allowed, the petitioner would be entitled to claim the credit even if the time limit for the same has lapsed.
Notice issued. |
Pending
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| 5 | Rosewood Hospitality Private Limited. v. Union of India (High Court, of Uttarakhand) | Matter Pending | — | — | Pending |
| 6 | Delhi International Airport Ltd. v. Union of India and ors. (Delhi High Court) | Matter Pending | Present writ petition has been filed challenging the constitutional validity and legality of Section 17(5)(c) and Section 17(5)(d) of the CGST Act, 2017 and the DGST Act, 2017 and the Circular No. 28 dated 01st January, 2018. | Notice Issued | Pending
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| 7 | Bamboo Hotel And Global Centre (Delhi) Pvt Ltd. v. Union of India and ors.(Delhi High Court) | Matter Pending | Same Issue | Notice Issued | Pending For 15-9-20 |
| 8 | Riveria Commercial Developers Limited. v. Union of India .(Delhi High Court) | Matter Pending | Same Issue | Notice Issued | Pending For 15-9-20 |
| 9 | Sree Varalakshmi Mahaal LLP (GST AAR Tamilnadu) | In Favor of Revenue | Whether the Input Tax Credit against purchases of materials construction of building materials can be claimed and utilize to nullify the cascading effect of taxation? | No Input Tax Credit is available against any goods or services received by the applicant for construction of the Marriage Hall on his own account even if used in course or furtherance of his business of renting the place. | AAR |
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