Dismissal of review petition in Safari Retreat case not to impact GST Act amendment

The recent dismissal by the Supreme Court of a review petition in Safari Retreats case will not impact the implementation of an amendment in the Central Goods and Services Tax (CGST) Act, a senior Government official has said. 

This assurance comes after the Supreme Court, on October 3, 2024, ruled that a building constructed for supplying services like renting or leasing could be considered a “plant,” thereby making it eligible for input tax credit (ITC) under GST. This decision upheld a ruling by the Odisha High Court in the case of Safari Retreats. The core of the issue lay in Section 17(5) of the CGST Act, which generally prohibits the application of ITC in works contract services used in constructing immovable property, with an exclusion for “plant and machinery.” 

The crucial question was how “plant and machinery” would be defined in this context. The High Court had determined that if an assessee was liable to pay GST on rental income from a mall, they were entitled to ITC on the GST paid for its construction. The Supreme Court affirmed this, stating that a “functionality test” should be applied to determine if a building qualifies as a plant, concluding that a shopping mall could be considered a plant if its construction was essential for providing services like renting or leasing.