A mall developer said it had accumulated more than ₹34 crore of GST input tax credit on construction inputs and services. The dispute reached the Supreme Court and became a practical lesson in how facts, asset function and documentation shape tax outcomes.
What the Court decided
The Supreme Court upheld the constitutional validity of Sections 17(5)(c) and 17(5)(d) of the CGST Act. It did not create a general right to claim input tax credit on the construction of commercial buildings.
At the same time, the Court held that the expression ‘plant or machinery’ in Section 17(5)(d) is different from the defined expression ‘plant and machinery’. A building may, on its own facts, qualify as a plant where its construction is essential to the taxable service being supplied. That question must be tested through the building’s actual function in the business.
Why this matters to promoters
For malls, warehouses and other property-led operating models, tax treatment cannot safely be decided from the asset label alone. The commercial design, use, revenue model, capitalisation policy and link with taxable outward supplies may all become relevant.
The judgment therefore moves the discussion from a simple classification argument to a documented business-and-function analysis. It also makes cash-flow scenario planning important because an adverse ITC position can materially change project returns and funding needs.
What leaders should do now
- Document how the property enables the taxable service and identify any special technical or commercial features.
- Reconcile capitalised expenditure, contracts, invoices, output tax and the intended use of each asset component.
- Model both ITC-available and ITC-blocked scenarios before finalising project returns or funding plans.
- Obtain case-specific tax and legal advice before taking or reversing credit.
CFO PERSPECTIVEThe judgment is a reminder that tax positions should be built into project models before capital is committed. A well-governed decision file should connect the legal interpretation with asset use, invoice evidence, cash impact and downside scenarios.
CA Jigarkumar Shah
Read the original material
Chief Commissioner of CGST & Ors. v. Safari Retreats Private Limited & Ors., 2024 INSC 756
Important: This article is general information and a business perspective based on the cited source. It is not legal, tax, accounting or investment advice. The law and official guidance may change; obtain advice for your facts before acting.