Supreme Court DISMISSES Review Petition on GST ITC | Buildings as Plant | Safari Retreats Case 2025
- NLF TAX & LEGAL
- May 23
- 5 min read
The Hon'ble Supreme Court of India in Chief Commissioner of Central Goods and Service Tax v. Safari Retreats (P.) Ltd C.A. No. 2948 of 2023 dated May 20, 2025 held that the review petition was dismissed as there was no error apparent on record regarding the earlier order which established that if construction of a building was essential for carrying out activity of supplying services, the building could be held to be a plant and would be taken out of the exception carved out by clause (d) of section 17(5), and that a functionality test must be applied in each case to determine whether a building constitutes a 'plant' for purposes of GST input tax credit provisions.
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Facts of the Case
The Respondent Safari Retreats (P.) Ltd. was engaged in the construction of malls and had accumulated Input Tax Credit (ITC) of more than 34 crores by purchase and supply of goods and services in the construction of mall. At the same time, the letting out of units in the shopping mall attracted Central Goods and Services Tax based on the rent received from tenants.
The Respondent was desirous of availing the accumulated ITC against the rental income generated from the mall. When the Respondent approached the concerned authorities seeking clarification on this matter, it was advised to deposit GST on the rent received without deducting the accumulated ITC because of the exception carved out in section 17(5)(d) of the Central Goods and Services Tax Act, 2017.
Being aggrieved by this advisory, the Respondent filed a writ petition before the High Court seeking a declaration that section 17(5)(d) did not apply to the construction of immovable property that was intended to be let out on rent. The Respondent contended that since it was liable to pay GST on rental income, it should be entitled to utilize the ITC accumulated on
GST paid during the construction of the mall.
The High Court ruled in favor of the Respondent and held that if the Respondent was required to pay GST on rental income from the mall, it was entitled to ITC on GST paid on the construction of the mall. The Petitioner Chief Commissioner of Central Goods and Service Tax filed a petition before the Supreme Court challenging the order of the High Court.
The Court further held that if construction of a building was essential for carrying out the activity of supplying services, the building could be held to be a plant and then it would be taken out of the exception carved out by clause (d) of section 17(5) to sub-section (1) of section 16.
The Petitioner filed the instant review petition being aggrieved by the Supreme Court's order dated October 03, 2024, seeking review of the judgment that favored the Respondent's position on ITC eligibility.
Issue
Whether the Supreme Court's order dated October 03, 2024 contained any error apparent on record warranting review of the judgment that held buildings used for service supply could qualify as 'plant' under section 17(5)(d) and be eligible for ITC.
Held by the Court
The Hon'ble Supreme Court of India in C.A. No. 2948 of 2023 held that:
The Court observed that it had gone through the review petition and perused the Judgment and Order dated October 03, 2024 which had been sought to be reviewed. The Court held that there was no error apparent on the record in the earlier judgment.
The Court affirmed its earlier position that the question whether a mall, warehouse or any building other than a hotel or a cinema theatre can be classified as a plant within the meaning of expression 'plant or machinery' used in section 17(5)(d) is a factual question which has to be determined keeping in mind the business of registered person and role that building plays in said business.
The Court reiterated that if construction of a building was essential for carrying out activity of supplying services, building could be held to be a plant and then it would be taken out of exception carved out by clause (d) of section 17(5) to sub-section (1) of section 16. The Court emphasized that to decide whether a building is a 'plant' for purposes of clause (d) of section 17(5), functionality test will have to be applied in each case on facts.
The Court opined that the principles laid down in the earlier order were sound and did not warrant any interference through review. The Court held that the delay in filing the review petition was condoned in the interest of justice and the defects raised by the Registry were waived, but ultimately dismissed the review petition for lack of merit.
Relevant Sections
Section 16 of the Central Goods and Services Tax Act, 2017 - Eligibility and conditions for taking input tax credit
Section 17 of the Central Goods and Services Tax Act, 2017 - Apportionment of credit and blocked credit
Section 17(5)(d) of the Central Goods and Services Tax Act, 2017 - "goods or services or both used for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of the same category of goods or services or both"
Section 17(5) of the Central Goods and Services Tax Act, 2017 - Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of this section, input tax credit shall not be available in respect of the following, namely
Pari Materia / Cases Referred
Chief Commissioner of Central Goods and Service Tax v. Safari Retreats (P.) Ltd. -
The original judgment dated October 03, 2024 which was sought to be reviewed in the present case, where the Court established the functionality test for determining whether buildings can be classified as 'plant' for GST purposes and held that such buildings used essentially for service supply would be eligible for input tax credit.
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