A two-judge bench of the Supreme Court on Tuesday granted leave to a Special Leave Petition challenging a judgment delivered by the Orissa High Court on the issue of levy of GST on rental/ lease payments.
Listing the matter to 20th April, 2023, a two-judge bench comprising Justice Aniruddha Bose and Justice Sudhanshu Dhulia referred the matter to a larger, 9 judge bench.
In the year 2019, the Orissa High Court comprising Chief Justice Shri K.S. Jhaveri and Justice K.R. Mohapatra has held that 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) of the CGST Act. However, the division bench was not inclined to hold 17(5)(d) to be ultra vires.
The petitioner’s grievance was that being a taxable person, they are liable to pay CGST as well as OGST in respect of the rent realized by them from different tenants to which the units of the shopping mall are let out.
The petitioner claimed that the benefit of input tax credit has been denied to the petitioner by applying Section 17(5) (d) of the CGST Act as well as of the OGST Act and the language of the said sub-section in both the Acts is identical.
Section 17(5) (d) of both the aforesaid Acts inter alia provides that notwithstanding anything contained in sub section (1) of Section 16 of both the aforesaid Act and sub section (1) of Section 18 of both the aforesaid Acts, input tax credit shall not be available in respect of the goods and 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 or both are used in the course or furtherance of business.
The Petitioner has been informed by the authorities under the CGST Act and OGST Act that in view of the aforesaid Section 17(5)(d) of both the aforesaid Acts the petitioner cannot avail of the benefit of credit of tax input paid by the petitioner on the purchases of input materials and services which have been used in the construction of the shopping mall for set off, against the CGST and OGST payable on rent received from the tenants of the shopping mall.
Disposing the writ petition, the High Court held that 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) of the CGST Act.
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