SC rejects finance ministry's plea against input tax credits for commercial rentals
Tired of too many ads?
Remove Ads
Tired of too many ads?
Remove Ads
The Supreme Court has rejected the finance ministry's petition seeking a review of its October judgement, which allowed real estate companies to claim input tax credits (ITC) on the construction cost for commercial buildings meant for renting purposes.A Bench led by Justice AS Oka while dismissing the ministry's plea on Tuesday said that it has gone through the review petition and the October 3 judgment, which has been sought to be reviewed, and 'there is no error apparent on the record.'The government wanted the apex court to align with the original legislative intent, after the 55th Goods and Services Tax Council had in December suggested a retrospective amendment to the GST law to correct what it described as a 'drafting error' in the legal provisions related to ITC.The ITC mechanism allows businesses to claim credit for the tax they paid on inputs and set it off against their GST liability.This proposed amendment aims to reverse the SC ruling by changing the terminology from 'plant or machinery' to 'plant and machinery' in Section 17(5)(d) of the Central Goods and Services Tax Act (CGST) Act, 2017.Saurabh Agarwal, Tax Partner, EY told ET that while the SC judgment on ITC aligns with the industry's logical expectation – that credit should flow seamlessly when output is taxed – the recent retrospective amendment in the last budget unfortunately negates this clarity. 'This development, therefore, doesn't bring the anticipated tax certainty . Instead, it's highly probable that after this development industry will now challenge the retrospective amendment made in terms of last budget, prolonging the uncertainty we all hoped to avoid.'Earlier the Central Board of Indirect Taxes and Customs chairman Sanjay Kumar Agarwal had also said that there had been a drafting mistake in the law as 'the term ' plant and machinery ' appears at 11 places in the GST Act but in one place, it was incorrectly written as 'plant or machinery.' This error is now being corrected with retrospective effect from July 1, 2017.'In a big relief to the real estate sector, the court had on October 3 last year held that if construction of a building is essential for supplying services like leasing/renting out, it could fall under the 'plant' category on which ITC can be claimed under Section 17(5)(d).This provision essentially prohibited claiming ITC for construction materials (other than plant or machinery) used for immovable property construction.The apex court ruled that 'if the construction of a building is essential for the activity of supplying services like renting or leasing, as outlined in clauses 2 and 5 of Schedule 2 of the CGST Act, the building may be considered a 'plant'."The apex court said that if buildings provided on rent perform the same function as that of a "plant" in a factory which produces economic value and output supply, then ITC on such buildings cannot be denied.In this case, the Odisha High Court in 2019 had allowed real estate firm Safari Retreats to claim the benefit of ITC on works contract and other goods and services used in the construction of an immovable property, excluding plant and machinery. The HC had ruled that ITC for construction materials under the provision cannot be denied to developers constructing properties for renting out. The revenue department then challenged the HC decision in the SC.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Hindu
31 minutes ago
- The Hindu
Sudha Murty conferred with Justice K.S. Hegde Charitable Foundation Award
Author, philanthropist, and Member of Rajya Sabha, Sudha Murty was on Wednesday conferred with the Justice K.S. Hegde Charitable Foundation Award 2025 for her contributions to literature and social service. The award ceremony was held on the Nitte Meenakshi Institute of Technology campus in Bengaluru. N. Vinaya Hegde, president, Nitte Education Trust and Chancellor, Nitte Deemed to be University, praised Ms. Murty's service and commitment to rural development, drawing inspiration from K.S. Hegde's legacy. N. Santosh Hegde, former Supreme Court judge and Karnataka Lokayukta, lauded Ms. Murty's work in empowering women and youth. In her acceptance speech, Ms. Murty highlighted the impermanence of material wealth, stressing the enduring impact of social contributions. 'Only the sacrifices we make for society will truly last,' she said. The foundation, established in honour of K.S. Hegde, former Supreme Court judge and Speaker of the Lok Sabha, recognises individuals annually on June 11 for societal contributions.
Time of India
41 minutes ago
- Time of India
Judicial overreach risks unsettling power balance, says Justice Kant
NEW DELHI: At a time when judicial activism is often perceived as intrusion into the legislative domain, senior most judge of Supreme Court, Justice Surya Kant, Wednesday warned against courts supplanting the role of the legislature. Tired of too many ads? go ad free now "Courts mustn't supplant the role of legislature or override the will of the people. Instead, they must act as facilitators of democratic dialogue - strengthening participatory governance, protecting the vulnerable, and ensuring rule of law prevails even in moments of political uncertainty... Judicial overreach risks unsettling the delicate balance of power," he said. CJI Gavai: Judicial activism mustn't turn into judicial terrorism In his keynote address at the 'Envision India Conclave' in San Francisco, Justice Surya Kant said, "True constitutional guardianship lies not in dominance but in restraint - an ethos that reaffirms the judiciary's legitimacy in a vibrant democracy." Speaking on similar lines on Tuesday night, CJI B R Gavai had said at Oxford Union, "Judicial activism is bound to stay. At the same time, judicial activism should not be turned into judicial terrorism. .. (judiciary at times) try to exceed the limits and try to enter into an area where, normally, the judiciary should not enter." Outlining the challenges faced by judiciary in the era of social media explosion where every person has something to say on everything, he said, "In today's hyper-connected world, we are witnessing the rise of a vast digital community - vocal, impatient and, often, uninformed - whose engagement with law is shaped less by understanding and more by sentiment." CJI B R Gavai further said, "They expect courts to deliver judgments that align with their transient emotions and impulses and when the courts' rulings do not match with their expectations based on half-cooked knowledge of law and Constitution, what follows is not reasoned critique but a barrage of trolling, misinformation and personal attacks." This phenomenon posed a subtle yet significant threat to the independence of judiciary, especially in a globalised digital age, CJI Gavai said, adding that it posed a challenge to the reputation of judges and the judicial institution. "It must be met not with timidity, but with the firmness and clarity of purpose that befits a constitutional democracy governed by reason, not rhetoric," he said.
Time of India
41 minutes ago
- Time of India
SC: Homebuyer seeking refund can't ask builder to reimburse loan interest
NEW DELHI: Supreme Court has held that a homebuyer, who seeks refund due to delay in completion of a project, cannot claim that a developer also reimburse the amount paid as interest on home loan. The buyer is only entitled to the principal amount paid to a company and a 'compensation' in terms of the interest on the said amount as per the agreement, it said. It set aside a consumer court order directing the Greater Mohali Area Development Authority to reimburse the interest paid by a homebuyer to a bank on home loan in addition to refunding the principal amount with 8% interest. SC: How buyer funds flat buy not developer's consideration A bench of Justices Sanjay Karol and Prasanna B Varale said there cannot be multiple heads to grant damages and interest over and above what is agreed upon between the homebuyer and the builder. Referring to various SC verdicts, the bench said there were no exceptional or strong reasons for directing GMADA to pay the interest on the loan taken by the homebuyer. The bench said, "Whether buyers of the flat do so by utilising their savings, taking a loan for such purpose or securing the required finances by any other permissible means, is not a consideration that the developer of the project is required to keep in mind. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like It's Affordable and Actually Works Undo "For, so far as they are concerned, such a consideration is irrelevant. The one who is buying a flat is a consumer, and the one who is building it is a service provider. That is the only relationship between the parties. "If there is a deficiency or delay in service, the consumer is entitled to be compensated for the same. Repayment of the entire principal amount along with 8% interest thereon, as stipulated in the contract, alongside the clarification that there shall be no other liability on the authority, sufficiently meets this requirement." In this case, the Punjab State Consumer Disputes Redressal Commission had directed GMADA to refund the entire amount of Rs 41 lakh along with interest at the rate of 8%, apart from compensation of Rs 60,000 to the buyer for the mental tension and harassment suffered by him, in addition to reimbursing the interest paid by the buyer to banks on home loan. The court said once the parties had agreed for a particular consequence of delay in handing over of possession, then there had to be exceptional and strong reasons to award compensation at more than the agreed rate.
