TaxTMI 
TaxTMI 
An appeal to the GST Council for consideration in their 58th meeting.
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....n appeal to the GST Council for consideration in their 58th meeting.<br>By: - K Balasubramanian<br>Goods and Services Tax - GST<br>Dated:- 10-9-2026<br>The Supreme Court in their verdict in the matter of Safari Retreats has categorically ruled based on Section 17 (5) (d) of the CGST Act 2017, in para 32 of their order that the construction activities of commercial buildings may be categorized in two baskets as to whether for on his own account or otherwise. It went one step further to explain that when a commercial building is constructed for future use such as office, godown, factory, warehouse etc., the same is for his own account and accordingly ITC is not eligible under section 17 (5) (d) on materials used for such construction. The int....
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....ention of the legislature may be understood as when the construction is completed and building is put to use, there is no more outward supply arising from such building and hence the chain of ITC stops. This is not so when the constructed building is let out or leased. Almost, in all the cases, the decision on as to whether the same is for on his own account or not is decided much in advance even before commencement of such construction as only after deciding the end use, the initial activities such as approval, layout, design etc. follows. This being so, where the intention during construction was to let it out, wherein the amount collected as rent for such building is subject to GST as service attracting a tax rate of 18%, the ITC on c....
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....onstruction materials such as steel, cement etc., were disallowed by the adjudicating authority on the following grounds. Despite the clear legal position spelt out by the Supreme Court in Safari Retreats case on 03/10/2024 itself, which view was also endorsed by the Supreme Court again on 20/05/2025 when the review petition was also dismissed, the adjudication officer made observations as : (1): "The expression "on own account" under Section 17(5)(d) includes situations where a registered person constructs property for ownership, control and capatilisation, irrespective of subsequent commercial usage. My view: This is contrary to the basic section 17 (5) (d). There are two situations. One is on his own account is applicable. Second i....
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....s on his own account is not applicable. This is the clear legal intent. Had the intention of the legislature been as that of the adjudication officer in (1), then what is the implication of the words on his own account ?. (2).The Act does not carve out any exception permitting ITC merely because the completed property is rented or leased. Leasing is an independent outward taxable supply arising only after completion of construction and cannot retrospectively alter the nature of inward supplies used during construction. My view: The views of the adjudicating officer could be arguable one till 02/10/2024. The order of Supreme Court distinguishing on own account from others was available in public domain on 03/10/2024 itself. This view i....
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....s also reiterated by the Supreme Court on 20/05/2025 in the review petition. Above all, while the Government amended the section 17 (5) (d) with retrospective effect from 01/07/2027 itself by replacing plant or machinery with plant and machinery quoting inadvertent error, the words on his own account were still kept live. This in line with Supreme Court verdict in Safari Retreats proves that ITC is eligible on construction materials when the construction is for the purposes of letting it out. (3): Acceptance of the Notice's interpretation would render Section 17(5)(d) otiose and defeat the legislative intent of blocking credit on immovable property. The legislature never intended to block all credits under 17 (5) (d). Section 17 (....
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....5) has several clauses and each clause is applicable as well as non applicable based on facts. As ell as circumstances of the case and more so is clause d. (4): Accordingly, the argument that leasing converts otherwise blocked credit into eligible credit is rejected." The adjudicating officer may kindly read para 32 of Safari Retreats case once again. Citation: Esnp Property Builder And Developers Private Limited, Represented By Its Authorised Signatory, Mr. Abhishek Agrawal, Esnp Property Builder And Developers Private Limited, Represented By Its Authorised Signatory, Mr. Abhishek Agrawal, Versus State Tax Officer (st), Group-V, VI, Joint Commissioner (state Tax) (intelligence) And Esnp Property Builders And Developers Private Lim....
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....ited, Represented By Its Authorised Signatory, Ms. Lata Vishnoi M Versus Assistant Commissioner (st), State Tax Officer (st) Group - V, VI, Joint Commissioner (state Tax) (intelligence), Commissioner Of Commercial Taxes - 2026 (9) TMI 280 - MADRAS HIGH COURT Key take aways: When a builder/promoter/ developer constructs a large building by investing huge capital in that building, necessary approvals from RERA, local authorities etc. are a must even to commence the construction. Unless the intention is very clear on the end use of the building, it would not even be possible to commence the construction. That being so, the observations of the adjudication authority as above are only for the sake of denial of ITC. The Madras High Cou....
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....rt has on 28/08/2026 held that " 8. Since the above findings were entered without considering the ratio of the judgment of the Supreme Court in Safari Retreats, re-consideration is warranted. Towards that end, the orders impugned in W.P.Nos.21432 & 21433 of 2026 are set aside and these matters are remanded for re-consideration. After providing a reasonable opportunity to the petitioner, fresh orders shall be issued within five months from the date of receipt of a copy of this order". Conclusion: The views of Safari Retreats case or more than abundantly clear now. Investors investing huge money on commercial buildings otherwise than on his own account may give a representation to the GST Council to either delete section 17 (5) (d) with ef....
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....fect from 01/04/2027 or to clarify that ITC is eligible when the end use is not for one's own account. In the meantime, let us hope that the proper officer passes the ITC in line with instructions of the Madras High Court to ensure that litigation on this issue ends here, giving meaning to the orders of Supreme Court as well as High Court. =============<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....