Page 28 - GSTL_16th July 2020_Vol. 38_Part 3

J70 GST LAW TIMES [ Vol. 38
(iii) pipelines laid outside the factory premises.
The above cited statutory provisions lays down that Input Tax Credit shall not be
allowed against works contract services in supply of immovable property but ITC
is allowed to sub-contractors for input services supplied and used in works con-
tract service. ITC is also allowed if goods or services are used for construction of
plant and machinery, which are used in the course or furtherance of business.
Illustration : Suppose ABC Company constructs an office building for its
corporate office and whatever tax paid on goods or services used in the construc-
tion of the said building ITC is not allowed as per Section 17(5)(d) of the CGST
Act. If ABC company constructs a blast furnace to use in manufacturing process
of ABC company then ITC is allowed against goods or services used for the con-
struction of ‘blast furnace’ , since ‘blast furnace’ is considered as ‘plant and ma-
chinery’ under GST, which is used in the furtherance of business of ABC compa-
ny.
Therefore, ITC would not be available to a registered person even if tax
paid on goods or services used for the construction of immovable property. In
other words, ITC is disallowed on ‘works contract services’ or tax paid on goods
or services used for the construction of immovable property. But ITC is allowed
on GST paid by sub-contractors’ services who provides input services to main
contractors.
Judicial pronouncement
(i) The Hon’ble High Court of Orissa has delivered a Landmark judg-
ment in the case of M/s. Safari Retreats Private Limited v. Chief Com-
missioner of Central Goods and Services Tax, Orissa reported in 2019
(25) G.S.T.L. 341 (Ori.) was held that “in our considered opinion the
provision of Section 17(5)(d) is to be read down and the narrow re-
striction as imposed, reading of the provision by the Department, is
not required to be accepted, inasmuch as keeping in mind the lan-
guage used in (1999) 2 SCC 361 (supra), the very purpose of the
credit is to give benefit to the assessee. In that view of the matter, if
the assessee is required to pay GST on the rental income arising out
of the investment on which he has paid GST, it is required to have
the input credit on the GST, which is required to pay under Section
17(5)(d) of the CGST Act.”
Thus, the Hon’ble High Court of Orissa allowed the Input Tax Credit of the GST
paid on all construction materials and input services used for the construction of
an immovable property (shopping mall) that was used for letting out of shops and
ITC then could be used for the payment of GST liability on lease rental services of
shops.
It is pertinent to mention that even though, department filed SLP before
the Apex Court against the said order of Orissa High Court and the Supreme
Court has issued notice but the Apex Court did not grant any stay of the said
judgment of Orissa High Court.
Therefore, the judgment of Orissa High Court is a precedent judgment
on CGST Act and has applicability across the country. Hence, the assessees in the
constructions sectors should take Input Tax Credits on all purchased materials
and Input Services used in their construction of immovable property and keep
balance in their credit ledger to avoid limitation as provided under Section 16(4)
of the CGST Act, 2017. If the Supreme Court upholds the judgment of Orissa
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