Safari Retreats Private Limited VS Chief Commissioner

The petitioners have filed a writ petition challenging the actions of the opposite parties. They contend that the opposite parties acted without due consideration of the provisions outlined in Section 17(5)(d) of the Central Goods and Services Tax (CGST) Act. This section likely pertains to input tax credit eligibility. The petitioners argue that the opposite parties failed to adhere to the stipulated regulations, leading to their dissatisfaction and subsequent legal challenge. The crux of their argument seems to be centered around procedural irregularities or non-compliance with statutory provisions, which they believe have negatively impacted their rights or interests.

The writ petition in question contests the actions of the opposing parties who, without taking into account the provisions stipulated in Section 17(5)(d) of the Central Goods and Services Tax Act (CGST Act), concluded that the CGST Act doesn’t apply to the construction of immovable property intended for rental purposes.

The petitioners, primarily engaged in the construction of shopping malls for subsequent rental purposes, argue that their business involves procuring substantial quantities of materials and services essential for construction. These include cement, sand, steel, aluminum, wiring, plywood, paint, lifts, escalators, air conditioning plants, chillers, electrical equipment, specialized facade materials, DG sets, transformers, building automation systems, as well as consultancy, architectural, legal, professional, engineering services, and the expertise of international designers. The procurement of these goods and services incurs significant CGST and OGST liabilities for the petitioners, particularly considering the scale of their operations.

In a specific instance, the petitioners highlight the construction of a sizable shopping mall at Esplanade, 721 Rasulgarh, Bhubaneshwar, Khordha, as a case in point. This project underscores the substantial investment and tax implications involved in their business activities.

The petition seeks to challenge the opposing parties’ interpretation of the law, asserting that the construction activities for rental purposes fall under the purview of the CGST Act, thereby subjecting them to tax liabilities.

The petitioners have filed a writ petition challenging the decision of the opposite parties who, without considering Section 17(5)(d) of the Central Goods and Services Tax Act (CGST Act), concluded that the provisions of the CGST Act do not apply to the construction of immovable property intended for rental purposes. The petitioners, primarily engaged in constructing shopping malls for leasing to multiple tenants, argue that their construction activities involve significant inputs such as cement, steel, architectural services, legal services, and international design services, all of which are taxable under the CGST Act and Odisha Goods and Services Tax (OGST) Act. They assert that they accumulate substantial input tax credit (amounting to Rs 34,40,18,028) on these purchases and wish to utilize this credit to offset the CGST and OGST payable on rental income.

The petitioners have recently completed a large shopping mall in Bhubaneshwar, Odisha, and intend to lease out its units. They acknowledge that rental income is subject to CGST and OGST as it constitutes a supply of service under the CGST Act/OGST Act. However, they seek to apply their accumulated input tax credit to offset the taxes due on this rental income. Despite their efforts to avail of this credit, the revenue authorities advised them to remit the CGST and OGST collected without utilizing the input credit, citing restrictions under Section 17(5)(d) of the CGST Act, and warned of penalties for non-compliance. As a result, the petitioners face significant financial burdens due to the inability to offset taxes using their accumulated input tax credit.

The central issue revolves around the applicability of the CGST Act and OGST Act to the construction of immovable property for rental purposes and the utilization of input tax credit for offsetting taxes on rental income. The petitioners argue that their construction activities are taxable under these acts and seek to leverage their input tax credit to discharge the taxes on rental income. However, the revenue authorities have advised against this, leading to a legal dispute over the interpretation and application of relevant provisions.

The petitioners have filed a writ petition challenging the decision of the opposing parties, who ruled that the Central Goods and Services Tax Act (CGST Act) does not apply to the construction of immovable property intended for rent. The petitioners, primarily engaged in constructing shopping malls for lease, argue that they incur significant expenses on materials and services such as cement, steel, architectural services, etc., all taxable under CGST and Odisha Goods and Services Tax (OGST). They completed a large mall in Bhubaneshwar and intend to rent its units. However, they were advised to pay CGST and OGST without availing input tax credit due to restrictions under Section 17(5)(d) of the CGST Act. They argue that their construction activity falls under the definition of “supply” as per Section 7 of the CGST Act and OGST Act, and thus, they qualify as “suppliers.” They seek to utilize input tax credits to offset CGST and OGST liabilities on rental income but face significant tax burdens due to the current interpretation. They emphasize that the purpose of the CGST Act is to prevent tax cascading and promote seamless input tax credit utilization, which they claim is being obstructed in their case.

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