CGST Act – GST Input Credit of Goods & Services in the Construction of Malls for rental income
Vast quantities of material, inputs and services are required for construction of malls in the form of goods and services like consultancy, architectural, legal and other professional services. They are taxable under CGST Act.
Respondent No.1 has accumulated GST input credit of more than Rs.34 crores by the purchase / supply of goods and services consumed and used in the construction of the construction mall.
At the same time, the respondent no.1 has let out units on rent received by it and GST is payable.
Respondent No.1 wants to avail accumulated GST ITC against GST on rental income from the mall premises.
This was not allowed.
Civil Appeal No.2948 of 2023 of the Chief Commissioner of Central Goods and Service Tax & others Vs. M/s. Safari Retreats Private Limited and others with connected matters.
Whether a mall, warehouse or any other building can be classified as a plant used in Section 17(5)(d) of GST Act for the purpose of GST input credit is a factual position. Functionality test must be applied on case-to-case basis to determine whether a building qualifies as a plant for tax purposes.
If the construction of a building is essential for supply services like rent or lease, the building may be considered a plant.
It is a boon to the industry. The eligibility of ITC will be decided on functionality and essentiality tests. Now, with this decision and applying the functionality test, credit may be admissible if the nexus or role of a particular product with the business of a taxpayer is shown.
