Sankalp In & Anr. Vs Union of India & Ors. (Gujarat High Court)
Gujarat High Court heard the petition filed by Sankalp In & Anr. challenging the validity of Section 17(5)(c)(d) of the Central Goods and Services Tax (CGST) Act, 2017. The petitioners argued against the restrictions imposed on input tax credit (ITC) under these provisions. However, their arguments were based on the Supreme Court’s recent ruling in Chief Commissioner of Central Goods and Service Tax & Ors. v. M/s. Safari Retreats Private Limited & Ors. (Civil Appeal No. 2948 of 2023), where the Apex Court upheld the constitutional validity of these provisions. The Supreme Court clarified that there was no ambiguity in the interpretation of Section 17(5) and that the clauses (c) and (d) were valid. Given this ruling, the petitioners expressed their intent to approach the respondent authority to determine whether Section 17(5)(d) applied to their case.
The Supreme Court had also ruled that the classification of a building, such as a mall or warehouse, as a “plant” for ITC eligibility must be determined based on its role in the taxpayer’s business. Applying the functionality test, it must be established whether the construction of an immovable property is essential for supplying services, such as leasing or renting. If the structure qualifies as a plant, it would not be excluded from ITC under Section 17(5)(d). Based on this, the Supreme Court remanded a related case to the Orissa High Court for further examination. Consequently, the Gujarat High Court disposed of the present petition, granting the petitioners the liberty to comply with the show cause notice on merits as per the Supreme Court’s ruling. The court discharged the notice and vacated any interim relief previously granted.
