The recent dismissal by the Supreme Court of a review petition in Safari Retreats case will not impact the implementation of an amendment in the Central Goods and Services Tax (CGST) Act, a senior Government official has said.

This assurance comes after the Supreme Court, on October 3, 2024, ruled that a building constructed for supplying services like renting or leasing could be considered a “plant,” thereby making it eligible for input tax credit (ITC) under GST. This decision upheld a ruling by the Odisha High Court in the case of Safari Retreats. The core of the issue lay in Section 17(5) of the CGST Act, which generally prohibits the application of ITC in works contract services used in constructing immovable property, with an exclusion for “plant and machinery.”

The crucial question was how “plant and machinery” would be defined in this context. The High Court had determined that if an assessee was liable to pay GST on rental income from a mall, they were entitled to ITC on the GST paid for its construction. The Supreme Court affirmed this, stating that a “functionality test” should be applied to determine if a building qualifies as a plant, concluding that a shopping mall could be considered a plant if its construction was essential for providing services like renting or leasing.

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Aggrieved by this initial Supreme Court ruling, the Centre filed a review petition, which was dismissed by a division bench of Justices Abhay S Oka and Sanjay Karol, on May 21, who found no error in their earlier decision.

Despite this dismissal, a senior government official has clarified to businessline that “the legislative amendment stands irrespective of the decision of the Court in the Review Petition.”

This refers to an amendment made to the CGST Act through the Finance Act 2025, which retrospectively substituted “plant or machinery” with “plant and machinery” in Section 17(5)(d), effective retrospectively from July 1, 2017. This amendment was enacted specifically to negate the implications of the Safari Retreats ruling.

Source: The Hindu Business Line