What is an Input Tax Credit (ITC)
It’s the lifeline that keeps the wheels of GST moving smoothly, preventing the dreaded cascading tax effect i.e. preventing double taxation in GST
But what happens when a certain provision challenges the very essence of ITC?
Enter Section 17(5)(d) of the CGST Act, a provision that has sparked a constitutional debate
This clause, which denies ITC for goods and services used in the construction of immovable property, has been put to the test in the Safari Retreats (P) Ltd. v. Chief Commissioner of Goods & Service Tax case.
The petitioners, involved in constructing shopping malls, found themselves in a tight spot when denied ITC for supplies used in their projects.
They argued that the provision should apply only when property is sold after completion, not when it’s leased or rented out
The main question of debate: Does Section 17(5)(d) infringe upon Article 14 and Article 19(1)(g) of the Indian Constitution?
On one side, the petitioners assert that this provision creates double taxation and unfairly treats them compared to those who sell their properties post-construction.
On the other, the department contends that ITC is a concession, not a right, and that the legislature has the latitude to design taxing statutes.
The Odisha High Court read down the provision, offering a lifeline to the petitioners?
It ruled that the provision should apply only when the property is sold after obtaining a completion certificate.
But the case now rests with the Supreme Court, awaiting a final judgment. This decision could have far-reaching implications, potentially reshaping the interpretation of ITC under GST!
So, what lies ahead for ITC in the GST landscape? Will the Apex Court uphold the Odisha High Court’s decision or take a different stance?
What is your point of view here?
You can share your views in the comment box.
Share this content: