Safari Retreats case on GST Council table, SC verdict may be reversed

In what could be a blow to real estate companies, the Goods and Services Tax (GST) Council in its meeting on Saturday is likely to take up the proposal to retrospectively amend the Central Goods and Services Tax (CGST) Act, thereby reversing the recent Supreme Court judgment in the Safari Retreats case. The top court had, in October, allowed input tax credit (ITC) claims on construction costs for rental properties. 

The SC judgment, according to experts, could have an adverse impact on the exchequer, to the tune of at least Rs.10,000 crore, as the ruling was effective retroactively from 01.07.2017. The SC concluded that the terms “plant and machinery” and “plant or machinery” used in the CGST Act are distinct and set forth guiding principles for defining “plant”. The court ruled that input tax credit eligibility must be assessed on a case-by-case basis, considering factors such as the taxpayer’s business nature and the operational role of the building. The case relates to eligibility of input tax credit for commercial properties meant for renting or leasing.

Source: Business Standard