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Informist, Wednesday, May 21, 2025

 

NEW DELHI – The Supreme Court has dismissed the finance ministry's review plea against the order permitting the real estate industry to claim input tax credit on construction expenses for buildings meant to be leased. "We have gone through the review petition and perused the judgment and order dated Oct. 3, 2024 which has been sought to be reviewed. There is no error apparent on the record. Review Petition is dismissed," said the top court.

 

In October, the apex court had held that the expression "plant or machinery" used in Section 17(5)(d) of Central Goods and Services Tax Act, 2017, cannot be given the same meaning as the expression "plant and machinery" defined by the explanation to Section 17. "If the construction of a building was essential for carrying out the activity of supplying services, such as renting or giving on lease or other transactions in respect of the building or a part thereof, which are covered by clauses (2) and (5) of Schedule II of the CGST Act, the building could be held to be a plant," the court had said.

 

The case had its genesis from an Odisha High Court ruling that allowed Safari Retreats Pvt. Ltd. to claim the benefit of input tax credits on works contracts and other goods and services used in the construction of an immovable property, excluding plant and machinery. The high court had said that input tax credit for construction materials under the provision cannot be denied to developers constructing properties for renting out.

 

In its review plea, the government had sought the apex court to align with its original legislative intent after the 55th Goods and Services Tax Council meeting in December suggested a retrospective amendment to the Central Goods and Services Tax Act, 2017, to correct what it described as a "drafting error" in the legal provisions related to income tax credit. The retrospective amendment had aimed to reverse the apex court's ruling by changing the terminology from "plant or machinery" to "plant and machinery" in Section 17(5)(d) of the Central Goods and Services Tax Act, 2017.  End 

 

Reported by Surya Tripathi

Edited by Deepshikha Bhardwaj

 

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