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YUGEN REALTY, SURAT
On October 3, 2024, the Supreme Court of India delivered a landmark ruling that permits input tax credits (ITC) on the construction costs of commercial buildings intended for leasing.
This decision is poised to stimulate investments in the commercial real estate sector and alleviate the financial burden on tenants.
The ruling particularly benefits major real estate firms like DLF, Max Estates, and Bharti Realty, enabling buildings to be classified as “plant and machinery” for tax purposes.
This classification broadens the scope of ITC benefits to include the rents paid across various industries for commercial properties.
The judgment originated from a petition by Safari Retreats in the Odisha High Court seeking ITC for goods and services used in constructing immovable property, excluding plant and machinery.
The Supreme Court’s decision, delivered by Justices Abhay S. Oka and Sanjay Karol, addressed the interpretation of “plant and machinery” under Section 17(5) of the tax code and upheld the constitutional validity of these provisions.
The court stated that ITC eligibility should be determined on a case-by-case basis, considering factors such as the nature of the taxpayer’s business and the building’s role in operational capabilities.
This ruling clarifies the conditions under which ITC can be claimed, particularly for structures that contribute significantly to a business’s performance.
Experts believe this decision will reshape ITC claims management, especially in construction and real estate, offering a more flexible interpretation that could include buildings like malls as plant and machinery.
The ruling also applies retroactively from the inception of GST, with stakeholders able to claim ITC for fiscal year 2023-24 until November 30, 2024. This development promises to reduce rental costs and foster greater investment in commercial real estate.
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Disclaimer : This information has been collected through secondary research and Yugen Realty Newspaper is not responsible for any errors in the same.
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