GST Update

 Desk of CA. Praveen Sharma – 1073 Series (CAPS) 

 Delhi High Court IN THE CASE OF  Important GST Ruling

Delhi International Airport Limited v. Union of India

Connected with Riveria Commercial Developers Limited v. Union of Indi

Delhi High Court: Important GST Ruling on Construction-Related ITC

The Delhi High Court recently dealt with the issue of Input Tax Credit (ITC) on goods and services used for constructing immovable properties in the cases of Delhi International Airport Limited v. Union of India and Riveria Commercial Developers Limited v. Union of India.

The companies had claimed ITC on construction-related expenses used for their taxable business activities. The department disputed the claims under Sections 17(5)(c) and 17(5)(d) of the CGST Act, which generally restrict ITC on construction of immovable property, except in specified cases involving plant and machinery.

During the proceedings, the Supreme Court decided Chief Commissioner of CGST v. Safari Retreats Private Limited. The Supreme Court upheld the constitutional validity of these provisions but also recognised the “functionality test” for determining whether a particular building or structure can qualify as a “plant.”

Following this decision, the Delhi High Court held that ITC eligibility should depend on the actual function and use of the property in the taxpayer’s business, rather than simply treating it as an ordinary building.

The High Court therefore left the factual determination to the GST adjudicating authority and allowed the companies to place their claims and supporting evidence before the appropriate authority.

Key Takeaway

Construction-related ITC is not automatically available, but it may be available where the taxpayer can establish that the structure functionally qualifies as a “plant” under the Safari Retreats test. Proper agreements, project documents and evidence showing the business use of the property can therefore be important in supporting the ITC claim.

LINK:CA. Praveen Sharma on Linkedin

Regards
CAPS