Chief Commissioner of Central Goods and Service Tax & Ors. Vs Safari Retreats Private Ltd. & Ors. (Supreme Court of India)
The Supreme Court of India recently issued a landmark judgment interpreting Section 17(5) of the Central Goods and Services Tax (CGST) Act, which could significantly alter how businesses claim Input Tax Credit (ITC) on immovable properties like shopping malls, commercial complexes, and office buildings. This decision holds potential to shift the compliance landscape for entities involved in constructing properties for leasing, renting, or commercial purposes.
Let’s delve into the crux of this ruling, its implications, and how businesses can leverage this new interpretation for potential tax benefits.
Also Read: SC dismissed review petition of department for Safari Retreat Pvt Ltd
Understanding the Core Issue
Section 17(5) of the CGST Act restricts the availment of ITC on goods and services used for the construction of immovable properties, with a key exception for “plant and machinery.” The intent behind this provision is to ensure that ITC is not misused for personal construction or for purposes that do not contribute to taxable supplies.
However, in scenarios where a business constructs a property for commercial use—such as renting out a shopping mall or leasing office spaces—the question arises: should the ITC on construction expenses be allowed?
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