Introduction
Input tax credit (“ITC”) is one of the important features of the Central Goods and Services Tax Act, 2017 (“CGST Act”) which avoids the cascading effect of taxes. The availment of ITC rests on fulfilment of conditions provided in Section 16 of the CGST Act. Nevertheless, certain additional restrictions are imposed by Section 17(5) of the CGST Act and no benefit can be availed in such cases. Recently, in SafariRetreats (P) Ltd. v. Chief Commissioner of Goods & Service Tax [2019 SCC OnLine Ori 443], the constitutionality of Section 17(5)(d) of the CGST Act was challenged on the basis of Article 14 and 19(1)(g) of the Indian Constitution.
Section 17(5)(d) of the CGST Act states as follows:
“(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely:
…
(d) 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 or furtherance of business.
Explanation.-For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;”
The Hon’ble Odisha High Court read down the provision to prevent it from being declared unconstitutional, however, the case is now pending before the Hon’ble Supreme Court for final verdict. The final hearing is scheduled in the last week of March’ 23, hence, a critical analysis of the case is of paramount importance.
Hereafter, a brief analysis has been provided by the author regarding the concerned issue. It may be noted that all references to the CGST Act also apply to Odisha Goods and Services Tax Act, 2017 as far as the case of Safari Retreats is concerned.