Eligibility to avail input tax credits – Landmark Judgement
A landmark judgement under the GST Law.
It will will have all positive impact on eligibility to avail input tax credits from the assesse ’s perspective.
In the writ petition of M/s. Safari Retreats Pvt Ltd and Another Vs. Chief Commissioner of Central Goods and Service Tax and Others [2019-VIL-223-ORI], Hon’ble High Court of Orrisa has allowed to claim input tax credit of GST in respect of goods and services used for construction of immovable property which is being let out where GST is levied on such rental income.
In this writ petition, Hon’ble Court has held that the very purpose of the Act is to make the uniform provision for levy collection of tax, intra state supply of goods and services both central or State and to prevent multi taxation.
Therefore, the contention which has been raised by the learned counsel for the petitioners keeping in mind the provisions of Section 16 (1) and 16 (2) of CGST Act, 2017, where restriction has been put forward by the legislation for claiming eligibility for input credit has been described in Section 16 (1) and the benefit of apportionment is subject to Section 17 (1) and 17 (2).
While considering the provisions of Section 17 (5) (d), the narrow construction of interpretation put forward by the Department is frustrating the very objective of the Act, in as much as the petitioner in that case has to pay huge amount without any basis.
Further, the petitioner would have paid GST if it disposed of the property after the completion certificate is granted and in case the property is sold prior to completion certificate, he would not be required to pay GST.
But here he is retaining the property and is not using for his own purpose but he is letting out the property on which he is covered under the GST, but still he has to pay huge amount of GST, to which he is not liable.
The Hon’ble Court has further held that the provision of Section 17(5)(d) is to be read down and the narrow restriction as imposed, reading of the provision by the Department, is not required to be accepted, inasmuch as keeping in mind the language used in (1999) 2 SCC 361 (supra), the very purpose of the credit is to give benefit to the assessee.
In that view of the matter, if the assessee is required to pay GST on the rental income arising out of the investment on which he has paid GST, it is required to have the input credit on the GST, which is required to pay under Section 17(5)(d) of the CGST Act.
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