Input Tax Credit for construction of immovable property used for lease is disallowed due to the plant and machinery exclusion amendment.

Input tax credit on goods and services used to construct an immovable property intended for letting is disallowed under the statutory blockage in Section 17(5)(d) read with the definition of plant and machinery; Section 16(1) entitlement is therefore subject to this exclusion. A retrospective amendment substituted "plant and machinery" to remove scope for treating a building as plant, and the effect is that construction of a commercial building/mall for rent falls within excluded supplies and the applicant cannot claim ITC for such inputs and input services.

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Issues: (i) Whether the applicant is eligible to claim input tax credit on goods and services used for construction of an immovable property (commercial building/mall) intended to be let out on rental basis where output GST is charged?

Analysis: The entitlement to input tax credit is subject to Section 16(1) of the Central Goods and Services Tax Act, 2017 which permits credit for inputs used in the course or furtherance of business, subject to conditions and restrictions. Section 17(5)(d) of the Central Goods and Services Tax Act, 2017 specifically blocks credit in respect of goods or services received for construction of an immovable property (other than plant and machinery) on the taxable person's own account, including when used in the course or furtherance of business. The expression "plant and machinery" (as defined in Section 17 explanation) excludes land and buildings. The Finance Act, 2025 (SI. No. 124) and Notification No. 16/2025-Central Tax dated 17.09.2025 effected a retrospective amendment to substitute the phrase "plant or machinery" with "plant and machinery" in Section 17(5)(d), thereby removing scope to treat a building as falling within the exclusion for plant in clause (d). The General Clauses Act, 1897 and Transfer of Property Act definitions confirm that a mall is an immovable property. Applying the statutory blockage in clause (d), and taking into account the retrospective amendment which aligns the clause with the exclusion of buildings from "plant and machinery", the construction of an immovable property for letting out falls within the category of supplies for which ITC is specifically disallowed.

Conclusion: The applicant is not eligible to claim input tax credit on goods and services used for construction of the immovable property (commercial building/mall) intended to be let out on rental basis.

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