Quick Summary
The GST Council's recent decision to retrospectively amend the GST law, restricting input tax credit (ITC) on construction services, has sent ripples across the real estate and infrastructure sectors. Announced during the Council's 55th meeting in Jaisalmer on December 21, 2024, the amendment aims to "correct" a drafting error in Section 17(5)(d) of the CGST Act. However, this move has sparked concerns over its legality and industry-wide impact. Impact of Retrospective Amendment The amendmen
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FAQ :
The GST Council decided to retrospectively amend the GST law to restrict input tax credit (ITC) on construction services, effectively nullifying a Supreme Court ruling.
The Supreme Court's ruling in the Safari Retreats case from October 2024 has been affected.
The ruling allowed ITC for commercial properties like shopping malls constructed for leasing or renting, by introducing the 'functionality test'.
The amendment replaces 'plant or machinery' with 'plant and machinery', preventing ITC claims on construction services that were previously allowed under the Supreme Court's interpretation.
The amendment is effective retrospectively from July 1, 2017.
Experts are concerned about the amendment undermining judicial authority, creating financial repercussions for businesses that claimed ITC, and potentially leading to legal challenges due to its retrospective nature.
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