Supreme Court Ruling in Safari Retreats Case: ITC on Construction Costs for Rental Property

In the Safari Retreats case, the Supreme Court ruled that input tax credit (ITC) on construction costs can be claimed if the construction is essential for renting out the property. The court interpreted Section 17(5)(d) of the CGST Act, which typically restricts ITC for goods and services used in constructing immovable property (excluding plant and machinery).

The court noted that if a building is necessary to provide services like renting, it may, in certain circumstances, be classified as a “plant,” allowing ITC to be claimed. The case has been sent back to the High Court to assess the facts using the “functionality test” to determine if the building qualifies as a plant.

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