The Supreme Court, in its decision dated 03.10.2024, in the case of M/s. Safari Retreats Private Limited vide Diary No. 37367/2019, upholds the constitutional validity of Section 17(5)(d) but interprets it in a way that prevents undue restriction on ITC claims when the immovable property is integral to the provision of taxable services, aligning with the broader objective of GST to avoid tax cascading.

The Supreme Court's decision clarifying that the renting of a building could qualify as a “plant” exception under Section 17(5)(d) of the CGST Act is significant for businesses involved in leasing immovable property. By accepting the assessee's claim to ITC on GST paid for building construction, the court has provided relief in scenarios where the constructed property is essential to the taxable activity, such as renting.

In summary, while the court rejected the constitutional challenge, it provided relief to taxpayers by holding that ITC is allowed for construction activities that qualify as “plant or machinery,” based on the facts of each case. Tax authorities will need to determine eligibility on a case-by-case basis.

The copy of judgment is not yet released.