The Supreme Courtroom’s rejection of the evaluation petition filed by the finance ministry within the landmark Safari Retreats case has put to relaxation questions round claiming enter tax credit score beneath the products and providers tax (GST) by industrial actual property companies for development prices for properties supposed for leasing.
Nonetheless, specialists be aware that it will likely be essential how courts view the retrospective modification on this matter.
In an order handed on Might 20, a two-judge Bench of the Supreme Courtroom of Justices Abhay S Oka and Sanjay Karol dismissed the evaluation petition filed by the GST division in opposition to the ruling within the Safari Retreats case. “We’ve got gone via the evaluation petition and perused the judgement and order dated 3 October, 2024, which has been sought to be reviewed. There isn’t a error on the document,” they held.
The case pertains to Safari Retreats Personal Ltd, which is concerned in industrial actual property. The case entails round claiming of ITC beneath GST by industrial actual property companies for developing immovable property that’s then rented out. The Supreme Courtroom in its October 2024 ruling within the case had utilized the “performance take a look at” 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 12 months had determined to retrospectively amend the GST legislation 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 numerous taxpayers earlier than the Supreme Courtroom, famous that the dismissal of the evaluation 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, significantly when such development is meant for additional enterprise use corresponding to leasing. The Supreme Courtroom’s unique determination had rightly emphasised the performance and essentiality checks to find out credit score eligibility beneath the GST regime. With the evaluation now conclusively dismissed, the matter tilts strongly in favour of the taxpayers, he stated.
Whereas the retrospective modification makes an attempt to change sure definitions, it can not override constitutional ideas or the judicial interpretation already laid down, he additional added.
Nonetheless, Abhishek Jain, Oblique Tax Head and Accomplice, KPMG, famous that the Supreme Courtroom’s rejection of the evaluation 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 determination,” he stated.
Saurabh Agarwal, Tax Accomplice, EY, additionally stated that whereas the Supreme Courtroom’s judgment on enter tax credit score aligns with the business’s logical expectation, the current retrospective modification within the final funds sadly negates this readability. “This improvement, subsequently, doesn’t deliver the anticipated tax certainty. As a substitute, it’s extremely possible that after this improvement business will now problem the retrospective modification made by way of final funds, prolonging the uncertainty all of us hoped to keep away from,” he stated.
