The GST Council has proposed amending the GST Act retrospectively to address the implications of the Supreme Court’s landmark judgment in the Safari Retreats case. In this judgment, the court applied the “functionality test” to determine the availability of input tax credit while distinguishing between the definitions of “plant or machinery” and “plant and machinery.”

The council said that the term ‘plant and machinery’ has been used at 11 places in the GST Act but only at one place it is mentioned as ‘Plant or Machinery’, now the drafting error under GST Act has been corrected from July 2017.

The Supreme Court has pronounced the verdict in the landmark case of Chief Commissioner Of Central Goods And Service Tax And Ors. Versus M/S Safari Retreats Private Limited And Ors. in which it was held that builders are eligible for input tax credit (ITC) on construction costs if building constructed for renting services.

The bench of Justice Abhay Oka and Justice Sanjay Karol has ruled that if the construction of a building was essential for carrying out activity of supplying services such as renting or giving on lease or other transactions in respect of the buildings or part thereof which are covered by clauses 2 and 5 of the Schedule 2 of the CGST Act, the building could be held as a plant. A Functional test will have to be applied to decide whether the building is a plant.

Read More: 55th GST Council Meet & Safari Retreat Judgement Of Supreme Court : Impact On Real Estate Developer