Construction of Immovable Property May Be Considered as “Plant” for Claiming ITC if It Is Critical to Business Operation | SC

Case Details: Chief Commissioner of Central Goods and Service Tax & Ors. vs. M/s Safari Retreats Private Ltd.& Ors. - [2024] 167 taxmann.com 73 (SC)

Judiciary and Counsel Details

• Abhay S. Oka & Sanjay Karol, JJ.

Facts of the Case

In the present case, the petitioner had constructed a shopping mall in which huge quantities of materials were purchased and CGST and SGST were paid on such purchases. The petitioner let out different units of the mall to different persons on rental basis and claimed benefit of input tax credit on GST paid by it on purchases of input materials and services which had been used in construction of shopping mall for set off, against GST payable on rent received from tenants. The authorities denied benefit of ITC in view of section 17(5)(d).

The Orissa High Court had read down section 17(5)(d) to give benefit of ITC to taxpayer on goods and services consumed in construction of shopping mall against GST payable on rentals received from tenants of shopping mall. But the department filed SLP against the order before the Apex Court.

Supreme Court Court Held

The Honorable Supreme Court noted that the expression “plant or machinery” used in Section 17(5)(d) cannot be equated with the term “plant and machinery” as defined by the explanation to Section 17 of the CGST Act. These terms must be interpreted distinctly in the context of their specific use under the law.

Moreover, a “functionality test” is necessary to determine whether a building qualifies as a “plant” under clause (d) of Section 17(5). This test involves assessing the specific facts of each case in light of the building’s purpose and utility in the registered person’s business. Thus, the Court held that if the construction of the immovable property is critical to the business’s operation, it may be considered a plant for the purposes of input tax credit under the CGST Act.

List of Cases Reviewed

• CCE v. Sold and Correct Engg. Works [2010] 5 SCC 122 (para 47) distinguished.