Quick Summary
The central government's move to retrospectively amend a section of the Goods and Services Tax (GST) Act in the Union Budget 2025-26 may face legal scrutiny, as a review petition related to the issue is expected to be heard by the Supreme Court in the coming weeks, tax experts reported. Retrospective Amendment to Section 17(5) of GST Act The proposed amendment pertains to Section 17(5) of the GST Act, which restricts the eligibility of Input Tax Credit (ITC) on certain items. The change is aim
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FAQ :
The government is proposing to retrospectively amend Section 17(5) of the GST Act, which relates to the eligibility of Input Tax Credit (ITC) on certain items.
The amendment aims to nullify a Supreme Court verdict from October 11, 2024, which permitted infrastructure companies to claim ITC on GST paid for construction materials used in commercial properties that are subsequently leased or rented out.
If upheld, the amendment could increase costs for real estate developers and leasing businesses as they may not be able to claim ITC on construction expenses, potentially leading to higher rental costs and slower real estate growth.
The Supreme Court is expected to hear the review petition in the coming weeks, with a decision anticipated by the end of February.
Retrospective tax amendments can face constitutional scrutiny, particularly under Article 14 and the doctrine of legitimate expectation. Previous rulings have opposed retrospective taxation that impacts taxpayers' substantial rights.
If the amendment is struck down, companies can continue to claim ITC, ensuring tax certainty. If upheld, businesses will need to adjust their tax liabilities and pricing models to account for the increased costs.
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