Budget 2025: Centre proposes amendments in CGST Act, overrides key SC verdict

The Centre has proposed an amendment in clause (d) of sub-section (5) in Section 17 of the CGST Act, 2017, substituting the words "plant or machinery" with the words "plant and machinery".

"Clause (d) of sub-section (5) is being amended to substitute the words "plant or machinery" with the words "plant and machinery" with effect from 1st July, 2017," finance minister Nirmala Sitharaman announced in her budget speech in Parliament on Saturday.

The proposal comes days after the ministry of finance filed a review petition before the Supreme Court following its recent judgment in the Safari Retreats case.

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According to a Business Standard report, the top court ruling permits commercial real estate companies to claim an input tax credit (ITC) on construction costs for rental properties.

Union Budget 2025 Key Highlights

What it means?

Sohrab Bararia, Partner, Grant Thornton Bharat, said,"The Union Budget 2025-26 brings a crucial amendment to Section 17(5)(d) of the CGST Act, replacing ‘plant or machinery’ with ‘plant and machinery’ retrospectively from July 1, 2017. This legislative change effectively overrides the Hon’ble Supreme Court’s ruling in the landmark Safari Retreats case, where the Court had permitted businesses to claim input tax credit (ITC) on properties classified as ‘plant’ under the functionality test."

“From a tax payers perspective, this amendment has far-reaching implications as industries that have structured their ITC claims based on the Safari Retreats ruling or the prevailing interpretation of existing provisions now need to urgently reassess their tax positions. The retrospective nature of this amendment may lead to substantial financial and compliance repercussions, potentially triggering disputes over past periods,” Bararia said.

“Additionally, the Finance Ministry’s review petition in the Safari Retreats case before the Supreme Court adds another layer of complexity. The Court’s stance on this amendment will be pivotal in determining its impact on ongoing and future litigations. Businesses must remain vigilant, proactively evaluate their tax strategies, and anticipate potential legal challenges as the GST framework continues to evolve,” Bararia added.

What is the Safari Retreats case?

According to a report by The New Indian Express, the Safari Retreats case pertains to the eligibility of input tax credit for immovable property, particularly commercial properties like shopping malls meant for leasing/renting.