Finance Bill 2025 Amendment to S. 17 (5)(d) Reversed Ruling of Supreme Court in Safari Judgement
A key ruling on the Input Tax Credit (ITC) under GST for real estate developers was rendered by the court in Safari Retreats Private Limited v. Chief Commissioner of CGST (2019)
Finance Bill 2025 Amendment – Reversed Ruling – Supreme Court – Safari Judgement – taxscan
Finance Bill 2025 Amendment – Reversed Ruling – Supreme Court – Safari Judgement – taxscan
The Finance Bill, 2025, amends clause (d) of sub-section (5) of section 17 of the Central Goods and Services Tax Act, reversing the Supreme Court's ruling in the Safari Retreats Case. A key ruling on the Input Tax Credit ( ITC ) under GST for real estate developers was rendered by the court in Safari Retreats Private Limited v. Chief Commissioner of CGST (2019).
To eliminate any ambiguity in interpretation for the purpose of obtaining input tax credit in such cases, clause 119 of the Finance Bill, 2025, aims to amend clause (d) of sub-section (5) of section 17 of the Central Goods and Services Tax Act by replacing the phrase "plant or machinery" with the phrase "plant and machinery."
Additionally, it aims to include an explanation to make clear that the aforementioned alteration is made regardless of any opposing language in any court ruling, decree, or order. This amendment shall take effect retrospectively from 1st day of July, 2017.
In order to lease out commercial spaces, Safari Retreats Pvt. Ltd. was building a shopping mall.The business claimed Input Tax Credit ( ITC ) on GST paid for goods and services linked to construction.Citing Section 17(5)(d) of the CGST Act, 2017, which limits ITC for goods and services used in the building of immovable property where it is not intended for sale, the tax authorities rejected the ITC.
Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
The business contended that ITC ought to be permitted because the built mall was being rented out, which is a taxable activity under GST. Even if it is utilized for taxable supplies like renting, the GST authority insisted that the ITC is prohibited for the development of immovable property.
Read More: [BREAKING] No Income Tax upto Rs. 12 Lakh Income, proposes FM during Budget 2025
In its ruling in support of Safari Retreats, the Orissa High Court said that preventing ITC in certain situations goes against the goal of the GST, which is to eliminate the cascading effect of taxes. ITC would be permitted if the property was sold, the court said, but it was unfair and inconsistent that ITC was being refused for renting the same property.
The Supreme Court granted the tax department's appeal and maintained the legality of Section 17(5)(d) of the CGST Act, 2017, which limits the Input Tax Credit ( ITC ) on the construction of immovable property.
To Read the full text of the Finance Bill CLICK HERE
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
