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TMI BlogSafari Retreats- Impact of Amendment proposed in the Finance Bill 2025X X X X Extracts X X X X X X X X Extracts X X X X ..... Safari Retreats- Impact of Amendment proposed in the Finance Bill 2025 X X X X Extracts X X X X X X X X Extracts X X X X ..... reats case. The same recommendation is already incorporated in the Finance Bill 2025 vide clause 119 of the said bill which shall have the force once notified by the Government. * The above said amendment is proposed to have retrospective effect from 01/07/2017 itself, once the same is notified so. * An in depth analysis of the relevant clause d of sub section 5 of section 17 as well as para 32 of the decision of the Supreme Court in the case of Safari Retreats (P) Limited would reveal that The Government is clear on denial of ITC as contained in clause d above only when the construction is ON OWN ACCOUNT. To elaborate further, as the law stands as on date as well as the law as it would stand once the clause 119 of the Finance Bill 2025 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is notified to be in force with effect from 01/07/2017 itself, would not deny any ITC based on construction activities to a tax payer, when the construction is NOT FOR OWN USE. * The above view is strictly based on the LEGAL INTREPRETAION OF Clause d of Sub section 5 of Section 17 of the CGST Act, 2017 as analysed below. * Clause d reads as below: goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course of furtherance of business. * This would mean, as per the developments taken so far that credit would not be admissible even with effect from 01/07/2017 itself, on any goods or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services or both received by a taxable person for construction of an immovable property when SUCH CONSTRUCTION IS FOR OWN USE. To elaborate further, when the constructed immovable property is used by the tax payer for his own use such as factory building, office building etc and which is not further let out on rent or lease to a third party and accordingly, there is no scope for generation of revenue to the Government by way of GST on rent or lease of immovable property. * This is so because, any other interpretation, other than in 06 above would make the four words ON HIS OWN ACCOUNT redundant. * Now we have two categories, one for OWN ACCOUNT and the other NOT ON OWN ACCOUNT. As the Government did have the intention on the seamless f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low of input tax credit on construction activities when the immovable property is further let out to third party post completion of construction and accordingly, the Government continues to get GST on rent, the proposed amendment, which is simply replacing one word "or" with "and" appearing in 17(5)(d) is done after careful thought. In case the Government had the proposal to deny credit on all construction of immovable property even when the same is NOT ON OWN ACCOUNT, the issue would have been suitable addressed in the Finance Bill 2025 by either removing the said four words ON HIS OWN ACCOUNT or by way of suitable explanation. * Clause 119 of the Finance Bill 2025 is reproduced below in total for a better understanding of the proposed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mendment. 119. In section 17 of the Central Goods and Services Tax Act, in sub-section (5), in clause (d), (i) for the words "plant or machinery", the words "plant and machinery" shall be substituted and shall be deemed to have been substituted with effect from the 1st day of July,2017; (ii) the Explanation shall be numbered as Explanation 1 thereof, and after Explanation 1 as so numbered, the following Explanation shall be inserted, namely:--'Explanation 2.--For the purposes of clause (d), it is hereby clarified that notwithstanding anything to the contrary contained in any judgment, decree or order of any court, tribunal, or other authority, any reference to "plant or machinery" shall be construed and shall always be deemed to have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construed as a reference to "plant and machinery". * After the recommendation of the GST Council on 21/12/2024, till 01/02/2025, the Government had amble time to suitably address the issue, in line with the intention of the Government on addressing the challenges arising out of Safari Retreats case dated 03/10/2024. Para 32 of the said Safari Retreats Judgment is on OWN ACCOUNT. This article is a development on analysis of para 32 (reproduced below for better understanding) with the clause 119 of the Finance Bill 2025. * 32. Clause (d) of Section 17(5) is different from clause (c) in various aspects. Clause (d) seeks to exclude from the purview of sub-section (1) of Sections 16 and 18, goods or services or both received by a taxable pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson to construct an immovable property on his own account. There are two exceptions in clause (d) to the exclusion from ITC provided in the first part of Clause (d). The first exception is where goods or services or both are received by a taxable person to construct an immovable property consisting of a "plant or machinery". The second exception is where goods and services or both are received by a taxable person for the construction of an immovable property made not on his own account. Construction is said to be on a taxable person's "own account" when (i) it is made for his personal use and not for service or (ii) it is to be used by the person constructing as a setting in which business is carried out. However, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstruction can not said to be on a taxable person's "own account" if it is intended to be sold or given on lease or license. * Out of the two curbs as above, one based on plant or machinery and the other on his own account, the Government has exhaustively addressed plant or machinery issue vide clause 119 as above but failed to address the issue pertaining to ON HIS OWN ACCOUNT. What is on OWN Account has been logically concluded as for his own personal or business use only and when the said immovable property is sold or let out, the curbs on ITC as provided in 17(5)d) are NOT APPLICABLE. Reply By Sadanand Bulbule as = Dear Sir Very illustratively deciphered the implications of both the Safari case judgement as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proposed amendment to Section 17[5][d]. The analysis has rekindled a ray of bright hope for the stakeholders in the real estate sector.
But the authorities need to come of out of "cage" to acknowledge this fact and the CBIC should also issue suitable clarification to remove the possible barricades in availing the lawful benefits to the taxpayers.
Dated: 6-2-2025 X X X X Extracts X X X X X X X X Extracts X X X X
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