In a recent Judgement, the Karnataka bench of the Authority for Advance Ruling ( AAR) refused to decide on the input eligibility for renting commercial property, stating that the matter is sub judice and pending before the Supreme Court.
M/s. Srinivas Plywoods, located in Hubli, Karnataka, applied for an Advance Ruling under Section 97 of the CGST Act, 2017, and KGST Act, 2017, They sought clarification on three main issues:-
(c) Input and Output Tax Treatment for Multiple Businesses under the Same GST Number
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The Applicant is currently engaged in the construction of a commercial complex and has inquired about the eligibility for input tax credit (ITC) on building materials purchased and utilized for this construction. The Applicant has referenced the case of M/s. Safari Retreats Private Limited v. Chief Commissioner of Central Goods and Service Tax.
In this case, the Odisha High Court ruled that Section 17(5) (d) of the CGST Act should be interpreted to apply only to instances where immovable property is sold after the issuance of a completion certificate. The court noted that since the property is retained by the Petitioner even after completion and subsequently let out on a rental basis, it would be eligible for ITC, as the subsequent rental transactions are subject to GST.
It was important to note that the aforementioned order of the Odisha High Court has been appealed to the Supreme Court of India, with the case number C.A. No. 002948/2023, and is currently pending. Given that the matter is sub judice, the Authority is unable to provide a ruling on the Applicant’s request for ITC on building materials utilized in the construction of the commercial complex.
The Applicant has sought advance ruling in respect of claiming ITC on building materials purchased and utilised for the construction of commercial complex. Since the same issue is pending before the Supreme Court, the same cannot be answered by this Authority as the case is sub judice.
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The Authority for Advance Rulings (AAR) has reviewed the submissions made by the Applicant and considered the relevant facts, arguments, and representations presented during the hearing. The AAR bench, consisting of M.P. Ravi Prasad and T. Kiran Reddy, noted that the issues raised in this application are identical to those addressed in the audit report. Consequently, the first provision to Section 98(2) of the CGST Act, 2017, applies to the current case, rendering it inadmissible.
It was clear that the Authority, which cannot render a decision on issues not covered under Section 97(2) of the CGST Act, 2017, refused to decide on the input eligibility for renting commercial property, stating that the matter is sub judice and pending before the Supreme Court.
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