Supreme Court Upholds GST Input Tax Credit Claims for Rental Properties in Landmark Ruling

New Delhi, Oct 3 (KNN) In a significant decision that could reshape the landscape of Goods and Services Tax (GST) claims, the Supreme Court of India has upheld the constitutional validity of Section 17(5)(d) of the Central Goods and Services Tax (CGST) Act while providing crucial clarification on input tax credit (ITC) claims related to immovable property.

The verdict, delivered on Thursday, in the case of M/s. Safari Retreats Private Limited (Diary No. 37367/2019), addresses a long-standing ambiguity in the interpretation of GST laws regarding the eligibility of ITC claims on the construction of buildings used for renting purposes.

While the court rejected the constitutional challenge to Section 17(5)(d), it interpreted the provision in a manner that prevents undue restriction on ITC claims when the immovable property is integral to the provision of taxable services. This interpretation aligns with the broader objective of the GST regime to avoid tax cascading.

In a key aspect of the ruling, the Supreme Court clarified that the renting of a building could qualify as a "plant" exception under Section 17(5)(d) of the CGST Act. 

This interpretation provides significant relief to businesses involved in leasing immovable property, as it allows them to claim ITC on GST paid for building construction when the property is essential to their taxable activity.

The court's decision to accept the assessee's claim to ITC in this case sets a precedent for similar scenarios where constructed property is fundamental to the provision of taxable services. 

However, it's important to note that the eligibility for such claims will be determined on a case-by-case basis, with tax authorities required to assess each situation individually.

Legal experts and tax professionals are eagerly awaiting the full text of the judgment, which has not yet been released. The detailed reasoning of the court is expected to provide further guidance on the application of this ruling in various business contexts.

This landmark decision is likely to have far-reaching implications for businesses across sectors, particularly those in real estate, hospitality, and other industries where immovable property forms a significant part of their operations. 

It underscores the Supreme Court's commitment to interpreting GST laws in a manner that balances revenue considerations with the principle of avoiding double taxation.

(KNN Bureau)