Supreme Court Reaffirms GST ITC on Leased Properties What It Means for Taxpayers
In a significant relief for real estate and commercial leasing businesses, the Supreme Court has dismissed the government’s review petition in the Safari Retreat case.
This landmark ruling reinforces a critical interpretation of the GST law and may have wide-ranging implications for businesses involved in commercial rentals.
What Was the Safari Retreat Case About?
The case involved Safari Retreats Private Limited, which constructed a shopping mall and leased it to tenants.
The tax department blocked the credit citing Section 17(5)(d) of the CGST Act, which disallows ITC on works contract services used for construction of immovable property.
Supreme Court’s Final Ruling (October 2024)
A two-judge bench of Justices Abhay S Oka and Sanjay Karol ruled:
- Buildings constructed for leasing/renting services can qualify as “plant”, which makes ITC claimable.
- This ruling provided relief from the narrow interpretation of Section 17(5).
In its review, the Court found no error and dismissed the petition on May 22, 2025.
🔗 Legal Reference:
- CGST Act Section 17(5)(d)
- Supreme Court Order Dated 3 Oct 2024 & Review Dismissal on 22 May 2025
Impact of the Ruling: Who Benefits?
This ruling is a win for:
| Stakeholder | Impact |
|---|---|
| Mall developers | Can claim ITC on construction expenses if property is leased |
| Real estate lessors | Relief from blocked credit litigation |
| Tax professionals | Stronger case to challenge Section 17(5) denial in similar matters |
| Businesses leasing property | Encouragement to structure assets under lease for ITC benefits |
Conflict with CGST Amendment: What’s Next?
The Finance Act 2024 introduced an amendment to Section 17(5)(d) to nullify the earlier Safari Retreat ruling. However:
- The SC review dismissal keeps the original ruling alive.
- Experts say this creates constitutional ambiguity and may require Parliamentary clarification or another constitutional challenge.
Expert View: What Practitioners Should Do Now
“Businesses leasing out buildings should preserve documentation to prove business use and leasing intent. The SC ruling gives a valid basis to claim ITC, but tax officers may still resist under the amended CGST Act.”
— R. Venkatesan, Tax Advisor, Chennai
Summary
The Supreme Court dismissed the government’s review in the Safari Retreat case, upholding GST input tax credit on buildings constructed for leasing. This strengthens taxpayers’ rights under Section 17(5)(d) and creates friction with the 2024 CGST amendment aimed at blocking such credits.
FAQs
Q1. Is ITC available on buildings constructed for leasing?
Yes, if the building is used for leasing/renting, the Supreme Court allows ITC under GST.
Q2. What if the officer denies ITC citing the amended Section 17(5)?
You can cite the Supreme Court judgment, but litigation risk remains.
Q3. Does this apply to residential properties given on lease?
No, only properties used for business leasing (like malls or office spaces) are covered.
Final Thoughts
Despite legal amendments, the Supreme Court’s interpretation holds authority, unless overridden by a constitutional bench or Parliament.