Credit Affirmed, But for How Long? The Safari Retreats Case and the GST Law Twist in Finance Act 2025CA. Pranay S. Jajodia

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The Tax Publishers GST--Block Input Tax Credit Credit Affirmed, But for How Long? The Safari Retreats Case and the GST Law Twist in Finance Act 2025 CA. Pranay S. Jajodia The learned author seeks to make an analytical study of the ratio of Supreme Court's decision in Safari Retreat's case and subsequent statutory developments occurred in the Finance Act, 2025. 1. Understanding the provision: Section 17(5)(d) of CGST Act At the heart of this legal controversy lies a provision that has challenged the foundational promise of the GST regime--seamless flow of credit. Section 17(5)(d) of the CGST Act, 2017 states that "Input tax credit shall not be available in respect of goods or services received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account, even when used in the course or furtherance of business." While this clause appears straightforward, its practical interpretation has created one of the most contentious debates in GST litigation. In theory, the GST system aims to avoid tax cascading by allowing businesses to claim credit on input taxes paid for goods or services used in their business. But in practice, this provision became a weapon against taxpayers involved in long-term leasing, especially those constructing commercial properties like shopping malls, offices, or hospitals--not for sale, but for generating rental income. Even when these businesses paid GST on inputs and continued to collect and deposit GST on rental income, they were denied the right to claim credit. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

GST--Block Input Tax Credit

Credit Affirmed, But for How Long? The Safari Retreats Case and the GST Law Twist in Finance Act 2025

CA. Pranay S. Jajodia

The learned author seeks to make an analytical study of the ratio of Supreme Court's decision in Safari Retreat's case and subsequent statutory developments occurred in the Finance Act, 2025.

1. Understanding the provision: Section 17(5)(d) of CGST Act

At the heart of this legal controversy lies a provision that has challenged the foundational promise of the GST regime--seamless flow of credit. Section 17(5)(d) of the CGST Act, 2017 states that "Input tax credit shall not be available in respect of goods or services received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account, even when used in the course or furtherance of business." While this clause appears straightforward, its practical interpretation has created one of the most contentious debates in GST litigation.

In theory, the GST system aims to avoid tax cascading by allowing businesses to claim credit on input taxes paid for goods or services used in their business. But in practice, this provision became a weapon against taxpayers involved in long-term leasing, especially those constructing commercial properties like shopping malls, offices, or hospitals--not for sale, but for generating rental income. Even when these businesses paid GST on inputs and continued to collect and deposit GST on rental income, they were denied the right to claim credit.