ITC on Transfer of Leasehold Rights Without Construction, Not Barred Under Section 17(5)(d)

Last updated: 24 April 2026

Quick Summary

The Gujarat High Court has ruled that Input Tax Credit (ITC) on charges paid for subdividing and transferring leasehold rights in industrial plots is not blocked under Section 17(5)(d) of the CGST Act, provided no construction activity takes place. The court found that the restriction on ITC specifically applies to construction-related expenses. Consequently, a show cause notice demanding ₹98,11,678 was quashed, and the ITC was ordered to be unblocked.

Court :
Gujarat High Court

Brief :
The Hon'ble Gujarat High Court in the case of Niket Bipinbhai Patel v. Assistant Commissioner (A.E.) CGST-Central Excise, Vadodara-II Commissionerate [R/Special Civil Application No. 18068 of 2025, order dated February 10, 2026] held that Input Tax Credit (ITC) availed on charges paid to Gujarat Industrial Development Corporation (GIDC) for sub-division and transfer of leasehold rights in plots cannot be treated as blocked credit under Section 17(5)(d) of the CGST Act when no construction activity is undertaken, and consequently quashed the show cause notice issued under Section 74 of the CGST Act and directed unblocking of ITC of ₹98,11,678 lying in the electronic credit ledger.

Citation :
R/Special Civil Application No. 18068 of 2025, order dated February 10, 2026

Daily Limit Reached