The Supreme Court docket’s rejection of the evaluate petition filed by the finance ministry within the landmark Safari Retreats case has put to relaxation questions round claiming enter tax credit score underneath the products and providers tax (GST) by industrial actual property corporations for development prices for properties meant for leasing.
Nonetheless, specialists notice that it will likely be essential how courts view the retrospective modification on this matter.
In an order handed on Could 20, a two-judge Bench of the Supreme Court docket of Justices Abhay S Oka and Sanjay Karol dismissed the evaluate petition filed by the GST division in opposition to the ruling within the Safari Retreats case. “We have now gone by way of the evaluate petition and perused the judgement and order dated 3 October, 2024, which has been sought to be reviewed. There isn’t any error on the file,” they held.
The case pertains to Safari Retreats Personal Ltd, which is concerned in industrial actual property. The case entails round claiming of ITC underneath GST by industrial actual property corporations for developing immovable property that’s then rented out. The Supreme Court docket in its October 2024 ruling within the case had utilized the “performance check” to find out availability of tax credit score whereas conceding that the definition of ‘plant or equipment’ must be seen as distinct from ‘plant and equipment’.
Nonetheless, the GST Council in its assembly in December final yr had determined to retrospectively amend the GST regulation to limit ITC on development providers with impact from July 1, 2017. The modification was carried out within the Union Price range 2025-26.
Abhishek A Rastogi, founding father of Rastogi Chambers, who had represented varied taxpayers earlier than the Supreme Court docket, famous that the dismissal of the evaluate petition within the Safari Retreats case is a big affirmation of the authorized place that enter tax credit score can’t be denied merely on the bottom of its use within the development of immovable property, notably when such development is meant for additional enterprise use equivalent to leasing. The Supreme Court docket’s authentic resolution had rightly emphasised the performance and essentiality assessments to find out credit score eligibility underneath the GST regime. With the evaluate now conclusively dismissed, the matter tilts strongly in favour of the taxpayers, he mentioned.
Whereas the retrospective modification makes an attempt to change sure definitions, it can’t override constitutional rules or the judicial interpretation already laid down, he additional added.
Nonetheless, Abhishek Jain, Oblique Tax Head and Associate, KPMG, famous that the Supreme Court docket’s rejection of the evaluate petition within the Safari Retreats case places to relaxation any doubt round its key findings, particularly the broader view on what qualifies as plant and equipment, and the restriction not making use of on procurements made for personal account. “With that settled, what now turns into essential is how courts view the retrospective modification introduced in by the Authorities to offset a big a part of this resolution,” he mentioned.
Saurabh Agarwal, Tax Associate, EY, additionally mentioned that whereas the Supreme Court docket’s judgment on enter tax credit score aligns with the trade’s logical expectation, the current retrospective modification within the final finances sadly negates this readability. “This growth, due to this fact, doesn’t carry the anticipated tax certainty. As a substitute, it’s extremely possible that after this growth trade will now problem the retrospective modification made by way of final finances, prolonging the uncertainty all of us hoped to keep away from,” he mentioned.
