CBIC notifies Oct 1 as date to enforce amendments in CGST Act
The Central Board of Indirect Taxes & Customs (CBIC) has notified October 1 as the date for bringing into force amendments in the CGST Act, enacted through the Finance Act 2025. These amendments retrospectively override the judicial interpretation in the Safari Retreats case. The changes specifically target blocked credit provisions under Section 17(5), negating the Supreme Court’s stance that buildings such as malls could qualify as ‘plant’ and, hence, be eligible for input tax credit (ITC).
“In exercise of the powers conferred by clause (b) of sub-section (2) of section 1 of the Finance Act, 2025, the Central government hereby appoints the first day of October as the date on which the provisions of clauses (ii) and (iii) of section121, sections 122 to 124 and sections 126 to 134 of the said Act shall come into force,” a CBIC notification said
Among these provisions, clause 124 is the most critical. It amends Section 17(5) of the CGST Act, which blocks ITC on 11 categories of expenditure, including the construction of immovable property. The amendment substitutes the phrase “plant or machinery” with “plant and machinery”, effective retrospectively from July 1, 2017, “notwithstanding anything to the contrary contained in any judgment, decree or order of any court or authority”.
In the particular provision, the amendment substitutes the words ‘plant or machinery’ with words ‘plant and machinery.’ This amendment will be effective retrospectively from July 1, 2017, “notwithstanding anything to the contrary contained in any judgment, decree or order of any court or any other authority”, said the explanatory memorandum to the Finance Bill 2025.
This language is designed to nullify the judicial precedent in the Safari Retreats case set by the Supreme Court. On October 3 last year, the Supreme Court upheld an Odisha High Court ruling that allowed ITC on construction of a shopping mall, holding that the mall functioned as a plant for providing taxable services such as renting or leasing. The Court had applied a functionality test to conclude that construction integral to service supply should be eligible for ITC.
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 the exclusion for “plant and machinery.”
