ITC on Construction of Immovable Property—Recent Development—CS. Pradeep Vyas

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The Tax Publishers GST--Input Tax Credit ITC on Construction of Immovable Property--Recent Development CS. Pradeep Vyas In this article, we will discuss the legislative intent behind blocking of ITC on construction of immovable property and fairness of amendment made to section 17(5)(d) under Finance Act, 2025, in view of the land mark decision of Supreme Court in the case of Safari Retreats (P) Ltd. 1. Introduction The Goods and Services Tax (GST) legislation has been enacted under article 246A, which empowers the Central and State legislatures to enact such a law. The tax structure under the GST legislation is heavily dependent on Input Tax Credit (ITC). The claim for ITC is subject to the restrictions as per the scheme of the GST legislation. Section 17(5)(d) of Central Goods and Services Tax (CGST) Act, 2017, blocks the availability of ITC in respect of goods or services or both received for "construction of immovable property". Section 17(5)(d) uses the words "construction of an immovable property (other than plant and machinery)" and before retrospective amendment brought by Finance Act, 2025, section 17(5)(d) used the words "construction of an immovable property (other than plant or machinery)". The use of words "other than plant or machinery" gave rise to ambiguity with regard to eligibility for ITC on construction of immovable property and it also brought the legislative intent under challenge before the Apex Court. Thereafter, vide Finance Act, 2025, the words "other than plant or machinery" has been replaced with the words "other than plant and machinery", with retrospective effect, to restrict the claim of ITC on construction of immovable property. In this article, we will discuss the legislative intent behind blocking of ITC on construction of immovable property and fairness of said amendment to section 17(5)(d), in view of land mark decision of Supreme Court in the case of Safari Retreats (P) Ltd. 2. Legislative provisions in respect of blocked credit Section 17 of the CGST Act, 2017 provides for apportionment of credit and blocked credit. Section 17(5) of the CGST Act, 2017 reads as under: "Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely:- SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

GST--Input Tax Credit

ITC on Construction of Immovable Property--Recent Development

CS. Pradeep Vyas

In this article, we will discuss the legislative intent behind blocking of ITC on construction of immovable property and fairness of amendment made to section 17(5)(d) under Finance Act, 2025, in view of the land mark decision of Supreme Court in the case of Safari Retreats (P) Ltd.

1. Introduction

The Goods and Services Tax (GST) legislation has been enacted under article 246A, which empowers the Central and State legislatures to enact such a law. The tax structure under the GST legislation is heavily dependent on Input Tax Credit (ITC). The claim for ITC is subject to the restrictions as per the scheme of the GST legislation. Section 17(5)(d) of Central Goods and Services Tax (CGST) Act, 2017, blocks the availability of ITC in respect of goods or services or both received for "construction of immovable property". Section 17(5)(d) uses the words "construction of an immovable property (other than plant and machinery)" and before retrospective amendment brought by Finance Act, 2025, section 17(5)(d) used the words "construction of an immovable property (other than plant or machinery)". The use of words "other than plant or machinery" gave rise to ambiguity with regard to eligibility for ITC on construction of immovable property and it also brought the legislative intent under challenge before the Apex Court. Thereafter, vide Finance Act, 2025, the words "other than plant or machinery" has been replaced with the words "other than plant and machinery", with retrospective effect, to restrict the claim of ITC on construction of immovable property. In this article, we will discuss the legislative intent behind blocking of ITC on construction of immovable property and fairness of said amendment to section 17(5)(d), in view of land mark decision of Supreme Court in the case of Safari Retreats (P) Ltd.

2. Legislative provisions in respect of blocked credit

Section 17 of the CGST Act, 2017 provides for apportionment of credit and blocked credit. Section 17(5) of the CGST Act, 2017 reads as under:

"Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely:-