Safari Retreats Private Limited (“Company”) Vs Chief Commissioner of Central Goods & Service tax (Orissa High Court)
The Company is mainly carrying on business activity of constructing shopping malls for the purpose of letting out of the same. Various materials and other inputs such as Cement, Sand, Steel, Aluminum, Wires, plywood, paint, Lifts, escalators, Air-Conditioning plant, Chillers, electrical equipments, DG sets, transformers, building automation systems and services such as architectural service, legal and professional service, engineering service and other services including services of special team of international designers were availed by the Company. All these goods and services purchased/received for such construction are taxable under the GST.
The Company completed construction of one of the large shopping mall at Odisha and started letting out different units of the said shopping mall to different persons on rental basis. The activity of letting out the units of the shopping mall attracts CGST and OGST on the amount of rent received by the Company. The Company having accumulated input Credit of GST amounting to Rs 34,40,18,028/- in respect of purchases of inputs in the form of goods and services wanted to avail the credit of input tax in order to utilise the said input credits to discharge and pay GST payable on the rentals received by the Company from the tenants. The revenue authorities advised the Company to deposit the CGST and OGST collected without taking input credit in view of restrictions placed as per Section 17(5)(d). The benefit of input tax credit has been denied to the petitioner on the ground that, input tax credit shall not be available in respect of the goods and services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.
Held by Orissa High Court:
While considering the provisions of Section 17(5)(d), the narrow construction of interpretation put forward by the Department in not in line with very objective of the Act, inasmuch as the petitioner in that case has to pay huge amount without any basis. In our considered opinion, 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.