Facts of the case:

In this case, the applicant is engaged in providing storage and warehousing services. For the purpose of its business, the applicant is constructing a warehouse / shed, which would either be used directly for providing storage and warehousing services or would be leased out to tenants. For such construction, the applicant proposed to procure cement, steel, beams, columns and other construction materials, and also avail construction services. The applicant acknowledged that Input Tax Credit (ITC) on construction-related goods and services was traditionally treated as blocked credit under Section 17(5) of the CGST Act, 2017. However, relying upon the Supreme Court judgment in Safari Retreats Pvt. Ltd., the applicant contended that the warehouse should be treated as a “plant” based on functional use, and therefore ITC should be admissible.

Accordingly, the applicant sought an advance ruling on the admissibility of ITC on goods and services used for construction of the warehouse.

Issue:

Whether Input Tax Credit is admissible on goods and services used for construction of a warehouse / shed, which is used for providing storage and warehousing services or is leased out, in light of the Supreme Court judgment in Safari Retreats Pvt. Ltd.

Held that:

The Authority for Advance Ruling denied the availability of ITC and ruled against the applicant, holding as under – 

• Works contract services used for construction of an immovable property are squarely hit by Section 17(5)(c) of the CGST Act. Since the warehouse/shed is a civil structure, ITC on such works contract services is blocked, as the definition of “plant and machinery” expressly excludes buildings and civil structures.
• With respect to Section 17(5)(d), the Authority examined the reliance placed on the Safari Retreats judgment. While the Supreme Court had earlier held that the term “plant or machinery” in Section 17(5)(d) required application of the functionality test, the Authority noted a crucial legislative change.
• Section 124 of the Finance Act, 2025 has amended Section 17(5)(d) by substituting the words “plant or machinery” with “plant and machinery”, and introducing an explanation clarifying that any contrary judicial interpretation shall be deemed overridden.
• The amendment has been given retrospective effect from 01.07.2017, and was notified with effect from 01.10.2025. As a result, the meaning of “plant and machinery” under Explanation 1 to Section 17 now governs clause (d) as well.
• Since “plant and machinery” expressly excludes land, buildings and civil structures, the warehouse/shed cannot qualify as plant or machinery, even if used for business or leasing.

Accordingly, ITC on cement, steel, beams, columns and construction services used for construction of the warehouse is not admissible.

Case Name: In Re: Premlata Rakesh Jain [Trade Name:– M/s Sambhav Warehousing]. dated 23.12.2025

To read the complete judgement 2025 Taxo.online 3445