In Chief Commissioner of CGST vs M/s Safari Retreats Pvt Ltd, likely to be listed on March 22, 2023, the Supreme Court is set to decide the constitutional validity of Goods and Services Tax ( GST ) Input Tax Credit ( ITC ) restrictions on immovable property.
The Section 17(5)(d) of the Central Goods and Services Tax Act, 2017 imposes a restriction on claims of ITC on immovable property.
Section 17(5)(d) of the CGST Act restricts claim of ITC over goods or 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.
Explanation.-For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property.
In a significant move earlier, the Supreme Court had admitted the appeal filed by the GST department against the order of the Odisha High Court wherein the High Court held that input tax credit is available in respect of GST paid while constructing the immovable property intending to let out for rent.
The petitioner, in the High Court case, had then contrasted an immovable property intending to let out the same for rent and claimed that input tax credit can be availed on the same since they are mainly carrying on the business activity of constructing shopping malls for the purpose of letting out the same to numerous tenants and lessees.
The following AAR and AAAR rulings hold an unfavourable view against the contentions of the assessee:
In Re: M/s KRBL Infrastructure Limited – 2022 TAXSCAN (AAR) 123
In Re: M/s INOX Air Products Pvt Ltd. – 2022 TAXSCAN (AAAR) 116
In Re: M/s MUMBAI AVIATION FULE FARM FACILITY PRIVATE LIMITED – 2023 TAXSCAN (AAR) 147
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