2019 (5) TMI 1278 - ORISSA HIGH COURT

Scope of Section 17(5)(d) - construction of immovable property (shopping malls) intending for letting out for rent - input tax credit from construction against output GST on rental income - it was alleged that the opposite parties without considering the provisions u/s 17 (5)(d) of the CGST Act held that the provisions regarding input credit of the CGST Act is not applicable - purpose of letting out he is earning out commercial rent income and he has to pay 18% GST on that - HELD THAT:- The very purpose of the Act is to make the uniform provision for levy collection of tax, intra state supply of goods and services both central or State and to prevent multi taxation.

Therefore, the contention which has been raised by the learned counsel for the petitioners keeping in mind the provisions of Section 16 (1)(2) where restriction has been put forward by the legislation for claiming eligibility for input credit has been described in Section 16(1) and the benefit of apportionment is subject to Section 17(1) and (2). While considering the provisions of Section 17(5)(d), the narrow construction of interpretation put-forward by the Department is frustrating the very objective of the Act, inasmuch as the petitioner in that case has to pay huge amount without any basis.

Further, the petitioner would have paid GST if it disposed of the property after the completion certificate is granted and in case the property is sold prior to completion certificate, he would not be required to pay GST. But here he is retaining the property and is not using for his own purpose but he is letting out the property on which he is covered under the GST, but still he has to pay huge amount of GST, to which he is not liable.

In that view of the matter, in our considered opinion the provision of Section 17(5)(d) is to be read down and the narrow restriction as imposed, reading of the provision by the Department, is not required to be accepted, inasmuch as keeping in mind the language used in EICHER MOTORS LTD. VERSUS UNION OF INDIA [1999 (1) TMI 34 - SUPREME COURT] , the very purpose of the credit is to give benefit to the assessee.

In that view of the matter, if the assessee is required to pay GST on the rental income arising out of the investment on which he has paid GST, it is required to have the input credit on the GST, which is required to pay under Section 17(5)(d) of the CGST Act.

In that view of the matter, prayer (a) is required to be granted. However, we are not inclined to hold it to be ultra vires. Prayer (b) is not accepted. The writ petition is allowed to the aforesaid extent.