Setback expected for Real Estate Sector as GST Council may Reverse SC Verdict in Safari Retreats Case
Real Estate Stocks had a seen good time in the last week, which might get rolled back depending on the GST Council Decision
The Goods and Services Tax ( GST ) Council is set to meet on Saturday (21st December, 2024) to mull over issues in the Goods and Services Tax ( GST ) Regime, while rumours of recommending amendments to supercede the Supreme Court ruling in the safari retreats case are reported by credible sources. Read More: 55th GST Council Meeting: Agenda, Time and Venue The Supreme Court ruling in...
The Goods and Services Tax ( GST ) Council is set to meet on Saturday (21st December, 2024) to mull over issues in the Goods and Services Tax ( GST ) Regime, while rumours of recommending amendments to supercede the Supreme Court ruling in the safari retreats case are reported by credible sources.
Read More: 55th GST Council Meeting: Agenda, Time and Venue
The Supreme Court ruling in the Safari Retreats Private Limited case, delivered on October 3, 2024, has ignited widespread discussion among developers and other industry players.
This landmark judgment, which addressed the eligibility of Input Tax Credit (ITC) on immovable property under Section 17(5)(d) of the CGST Act, has both clarified and complicated the legal aspects for sectors like real estate, ports, airports, and infrastructure.
Read More: Supreme Court allows Revenue Department's Appeal in Safari Retreats GST Input Tax Credit Case
The case centered on whether ITC can be claimed for commercial properties like shopping malls constructed for leasing purposes. Previously, under Section 17(5)(d) of the CGST Act, developers could not claim ITC on GST paid for goods and services used in constructing immovable property meant for self-use, despite its utilization in furtherance of business. This prohibition led to an additional financial burden on developers.
Read Also: Safari Retreats Supreme Court Judgement: GST ITC available on Necessary Construction for Renting Out
In 2019, the Odisha High Court had ruled in favor of the petitioner, Safari Retreats Private Limited, stating that denying ITC on malls intended for rental income contradicted the GST’s objective of avoiding cascading taxes. However, the Revenue Authorities challenged this verdict in the Supreme Court.
The Supreme Court upheld the constitutional validity of Sections 17(5)(c) and 17(5)(d), citing their rational nexus to legislative objectives. However, it endorsed a broader interpretation of the term "plant or machinery" within Section 17(5)(d). The Court introduced the "functionality test," determining that buildings like malls could qualify as "plant" if their functionality aligns with the business's core objectives. This nuanced approach offers relief to developers but leaves scope for interpretation in other sectors like ports, airports, and warehouses.
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Amidst the legal implications and complications, rumors are rife that the GST Council, in its upcoming meeting on Saturday, December 21, may review this ruling and propose amendments to the GST Act. Potential clarifications could address unresolved issues such as ITC eligibility for works contract services in leased properties, ensuring uniformity in tax treatment across sectors.
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