Availability of ITC on Construction of Building for Letting Out

[vaibhav agrawal]

After the judgment of the Hon'ble Supreme Court in the case of Safari Retreats Private Limited - 2024 (10) TMI 286 - Supreme Court and the subsequent amendment made through the Finance Act, 2025 in Section 17(5)(d) of the CGST Act, I seek your views on the availability of Input Tax Credit (ITC) on the construction of a building intended for letting out on rent.

Key considerations:

1. Amendment to "Plant or Machinery":
   The term "plant or machinery" has been substituted with "plant and machinery" retrospectively from 1 July 2017. Further, an explanation has been inserted with effect from October 2025, clarifying that:

   "For the purposes of clause (d), it is hereby clarified that notwithstanding anything to the contrary contained in any judgment, decree or order of any court, tribunal, or other authority, any reference to 'plant or machinery' shall be construed and shall always be deemed to have been construed as a reference to 'plant and machinery'."

2. Supreme Court ruling in Safari Retreats Pvt. Ltd.:
   The Hon'ble Supreme Court held that construction undertaken for the purpose of leasing out the property cannot be considered as construction on one's own account.

Query:

In light of the above judgment and the retrospective amendment to Section 17(5)(d), whether ITC would still be available on the construction of a building intended for leasing / letting out,

I would appreciate insights from professionals on whether the amendment effectively overrides the interpretation arising from the Safari Retreats judgment or if ITC may still be claimed under certain circumstances.

AI Summary

Input tax credit on leasing construction remains contentious after retrospective amendment and blocked-credit rules under GST.
Input tax credit on construction of immovable property intended for letting out was discussed in light of the Supreme Court's view in Safari Retreats and the retrospective amendment to section 17(5)(d) of the CGST Act. The discussion proceeds on the basis that the amendment replacing "plant or machinery" with "plant and machinery" restricts credit on construction-related inward supplies, while works contract services and construction of immovable property remain blocked except for plant and machinery. It also distinguishes capitalised construction from non-capitalised repairs or maintenance, stating that the accounting treatment is relevant but not conclusive.