The ruling, was released by a bench in which Justice Abhay S.
Earlier, the Supreme Court had admitted that the efficiency test and mandatory test should be implemented to determine the eligibility of ITC. This means that if a manufactured property is functionally necessary and required to supply taxable, such as leasing the commercial property, the ITC should not be completely rejected because the property is immovable.
The review petition is seen as a major relief for areas such as real estate, infrastructure, hospitality and lease, where blocked credit provisions have greatly increased the cost of the project and disrupted the tax plan.
Experts speak
Commenting on development, Abhishek, a Rastogi, founder of Rastogi Chambers, who represented about a dozen petitioners in similar cases before the Supreme Court, welcomed the verdict.
“The dismissal of the review petition filed by Revenue in the Safari Retreat case is an important confirmation of the legal status that the input tax credit cannot only be denied based on its use in the construction of real estate, especially when such construction is intended for the use of further businesses, such as leased.
Rastogi emphasized that the intention behind GST was to provide a spontaneous flow of credit and in such cases would refuse the very foundation of the structure by refusing the ITC.
“A narrow and restrictive interpretation of GST Credit provisions defeats the main objective of GST. While the retrievable amendment tries to modify some definitions, it cannot already decide constitutional security or judicial interpretations by the apex court,” said Rustogi.
Similarly, Abhishek Jain, Indirect Tax Head and Partner, KPMG said, âRejection of the review petition in the Supreme Court’s Safari Retreat Case asks to relax any doubts around its major conclusions, especially what is the merit as a plant and machinery, and not applied to the purchase made for their own account.
With that settlement, what becomes important now is how the courts look at the retrospective amendment brought by the government to offset an important part of this decision. ,
However, experts also pointed to a complexity. While the Supreme Court decides to align a spontaneous credit flow for production with the expectations of the industry, the retrospective amendment in the previous budget has reduced that clarity. Instead of bringing tax certainty, dismissing the review petition may lead to further litigation, expecting the rebuilt amendment with the industry – thus lengthening uncertainty.
Tax partner in EY Saurabh Aggarwal said, “While the Supreme Court’s decision on input tax credit aligns with the logical expectation of the industry – that credit should be originally flowed when taxes are imposed when the output is taxed – recent recent revisions in the previous budget are unfortunately denying this clarity.
Therefore, this development does not extend certainty by anticipating. Instead, it is highly likely that after this growth industry will now challenge the retrospective amendment made in terms of previous budget, uncertainty for a long time that we expected to avoid all of us. ,
Industry influence
It carries out extensive implications in industries that invest in the ruling industries and heavy investments in immovable property for commercial use. Developers who construct malls, offices, hotels and industrial parks for lease or for commercial purposes can now re -observe their GST posts with renewed confidence.
By clarifying that ITC is not automatically blocked to real estate, ruling reduces litigation risk and opens the possibilities for cost savings and credit optimization. Businesses who wrote credit or were engaged in controversies can now assure their positions in the light of the Supreme Court.
What should taxpayers do now
Taxpayers are advised to take the following steps in the light of the ruling and dismiss the revenue review petition:
- Review existing transactions: Check the re -running and previous projects where the ITC was rejected or left unclaimed due to the blocked credit provisions.
- Apply efficiency and mandatory tests: Evaluate whether the property is directly linked to taxable output and is necessary for business operations.
- Documents Professional Uses: Maintain strong documentation to establish that the property is used for commercial purposes (eg, lease agreements, business models, use reports).
- Search for refund or recover where applied: In cases where ITC was rejected, find out the possibilities for refund or credit reclaim.
- Attached to active representation: In the ongoing departmental disputes, use this Supreme Court’s example to support your situation.
“Now it is important to examine the nature of their professional activity for taxpayers and how the property is used is important. The phrase should be interpreted in such a way ‘on its own account’, which allows clear credit to the business to move forward. The courts have already recognized this specific, and the administrative authorities should now explain it.
He said, “Refusing to entertain the Supreme Court review provides very necessary legal certainty and economic relief. Taxpayers should claim their right claims for this landmark judicial example and a purposeful reading of the GST law,” he concluded.
As a traction of ruling benefits, departmental practices and taxpayers are expected to influence strategies for the coming years, re -establishing the basic GST theory of spontaneous credit flow.
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