{"id":28589,"date":"2025-02-05T22:06:02","date_gmt":"2025-02-05T16:36:02","guid":{"rendered":"https:\/\/carajput.com\/blog\/?p=28589"},"modified":"2025-10-28T13:00:08","modified_gmt":"2025-10-28T07:30:08","slug":"amendment-on-itc-for-construction-expenses-in-budget-2025","status":"publish","type":"post","link":"https:\/\/carajput.com\/blog\/amendment-on-itc-for-construction-expenses-in-budget-2025\/","title":{"rendered":"Amendment on ITC for Construction Expenses in Budget 2025"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Page Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69e1b34a627eb\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69e1b34a627eb\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/carajput.com\/blog\/amendment-on-itc-for-construction-expenses-in-budget-2025\/#Retrospective_Amendment_on_ITC_for_Construction_Costs\" title=\"Retrospective Amendment on ITC for Construction Costs\">Retrospective Amendment on ITC for Construction Costs<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/carajput.com\/blog\/amendment-on-itc-for-construction-expenses-in-budget-2025\/#Impact_on_Sectors\" title=\"Impact on Sectors:\">Impact on Sectors:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/carajput.com\/blog\/amendment-on-itc-for-construction-expenses-in-budget-2025\/#Legal_Context\" title=\"Legal Context:\">Legal Context:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/carajput.com\/blog\/amendment-on-itc-for-construction-expenses-in-budget-2025\/#Input_tax_credit_removal_set_to_hit_commercial_realty_cos\" title=\"Input tax credit removal set to hit commercial realty cos\">Input tax credit removal set to hit commercial realty cos<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/carajput.com\/blog\/amendment-on-itc-for-construction-expenses-in-budget-2025\/#Bona_Fide_Purchasers_Right_to_ITC_Supreme_Court\" title=\"Bona Fide Purchasers\u2019 Right to ITC : Supreme Court\">Bona Fide Purchasers\u2019 Right to ITC : Supreme Court<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/carajput.com\/blog\/amendment-on-itc-for-construction-expenses-in-budget-2025\/#Key_Tax_and_ITC_Developments_Recent_Supreme_Court_Ruling\" title=\"Key Tax and ITC Developments Recent Supreme Court Ruling. \">Key Tax and ITC Developments Recent Supreme Court Ruling. <\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-22938\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2022\/08\/ITC.png\" alt=\"ITC\" width=\"862\" height=\"751\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2022\/08\/ITC.png 450w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2022\/08\/ITC-300x261.png 300w\" sizes=\"(max-width: 862px) 100vw, 862px\" \/><\/h2>\n<h2><span class=\"ez-toc-section\" id=\"Retrospective_Amendment_on_ITC_for_Construction_Costs\"><\/span><span style=\"color: #000080;\"><strong>Retrospective Amendment on ITC for Construction Costs<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li><strong>What\u2019s Changing :<\/strong> A retrospective amendment, effective from July 1, 2017, prevents entities\u2014like commercial real estate companies\u2014from claiming Input Tax Credit (ITC) on goods and services used in the construction of immovable property on their own account (e.g., buildings, warehouses). The government proposes a retrospective amendment (effective from July 1, 2017) that disallows commercial real estate companies from claiming Input Tax Credit (ITC) on construction costs for rental properties.<\/li>\n<li>Entities constructing immovable properties (e.g., commercial buildings, warehouses) for their own use will no longer be eligible for ITC on the goods and services used in construction.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Impact_on_Sectors\"><\/span><span style=\"color: #000080;\"><strong>Impact on Sectors:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-28590\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2025\/02\/ITC.jpg\" alt=\"ITC\" width=\"886\" height=\"535\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2025\/02\/ITC.jpg 742w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2025\/02\/ITC-300x181.jpg 300w\" sizes=\"(max-width: 886px) 100vw, 886px\" \/><\/p>\n<ul>\n<li>Hospitality &amp; Commercial Leasing: The amendment particularly affects industries like hospitality and commercial leasing by restricting ITC on construction costs, potentially increasing their tax outgo. This change significantly impacts hospitality and commercial leasing sectors, potentially increasing their overall GST liability.<\/li>\n<\/ul>\n<ul>\n<li>Investor Confidence: Industry experts, such as Rohit Jain from Economic Laws Practice, caution that this retrospective change is seen as retrograde and regressive, undermining the stability and predictability that investors value.<\/li>\n<li>Industry Reactions:\n<ul>\n<li>Experts like Vimal Nadar of Colliers India warn that the retrospective nature of this amendment undermines stability and predictability, potentially deterring investors.<\/li>\n<li>The actual impact will depend on whether companies have been claiming ITC since 2017 and how they adjusted their tax calculations following the SC ruling in 2024.<\/li>\n<li>The amendment aims to clarify the definition of \u201cplant and machinery\u201d for ITC eligibility, but it also poses challenges for the commercial real estate sector by retroactively restricting benefits previously enjoyed.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Legal_Context\"><\/span><span style=\"color: #000080;\"><strong>Legal Context:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Supreme Court Precedent: The amendment overturns part of the Supreme Court ruling in the Safari Retreats case, where ITC was allowed by considering a building as \u201cplant.\u201d\u00a0The original Supreme Court interpretation distinguished between \u201cplant or machinery\u201d (permitting ITC) and \u201cplant and machinery.\u201d The amendment replaces \u201cplant or machinery\u201d with \u201cplant and machinery.\u201d\u00a0Potential for Legal Challenge: Given the Supreme Court\u2019s stance that vested rights should not be revoked retrospectively, taxpayers may have grounds to challenge this amendment.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Input_tax_credit_removal_set_to_hit_commercial_realty_cos\"><\/span><span style=\"color: #000080;\"><strong>Input tax credit removal set to hit commercial realty cos<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The amendment overturns a recent Supreme Court decision (Safari Retreats case) where ITC was allowed by classifying buildings as \u201cplant\u201d under the GST Act. The revised budget replaces \u201cplant or machinery\u201d with \u201cplant and machinery\u201d as per the GST council\u2019s recommendation, thereby narrowing the eligibility for ITC claims.<\/p>\n<p>While the amendment restricts Input Tax Credit claims on construction costs for certain properties, parts of the Supreme Court\u2019s interpretation regarding \u201cconstruction on one\u2019s own account\u201d remain intact, offering some room for legal recourse in commercial real estate and infrastructure sectors. This change is expected to bring clarity to tax laws, though it may face legal challenges given its retrospective nature and its divergence from earlier Supreme Court interpretations.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-28591\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2025\/02\/Input-tax-credit-removal-set-to-hit-commercial-realty-cos.jpg\" alt=\"Input tax credit removal set to hit commercial realty cos\" width=\"1096\" height=\"1096\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2025\/02\/Input-tax-credit-removal-set-to-hit-commercial-realty-cos.jpg 1096w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2025\/02\/Input-tax-credit-removal-set-to-hit-commercial-realty-cos-300x300.jpg 300w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2025\/02\/Input-tax-credit-removal-set-to-hit-commercial-realty-cos-1024x1024.jpg 1024w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2025\/02\/Input-tax-credit-removal-set-to-hit-commercial-realty-cos-150x150.jpg 150w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2025\/02\/Input-tax-credit-removal-set-to-hit-commercial-realty-cos-768x768.jpg 768w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2025\/02\/Input-tax-credit-removal-set-to-hit-commercial-realty-cos-800x800.jpg 800w\" sizes=\"(max-width: 1096px) 100vw, 1096px\" \/><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Bona_Fide_Purchasers_Right_to_ITC_Supreme_Court\"><\/span><span style=\"color: #000080;\"><strong>Bona Fide Purchasers\u2019 Right to ITC : Supreme Court<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"Key_Tax_and_ITC_Developments_Recent_Supreme_Court_Ruling\"><\/span><span style=\"color: #000080;\"><strong>Key Tax and ITC Developments Recent Supreme Court Ruling. <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"color: #000080;\"><strong>Reliance on <em>Pr. Commissioner of Income Tax-21 v. M\/s. Remfry &amp; Sagar (2025) : \u00a0<\/em><\/strong><\/span>The Court heavily relied on the judgment in <em>Pr. CIT-21 v. M\/s. Remfry &amp; Sagar (2025)<\/em>, where a coordinate bench rejected the Department\u2019s contention that the licence to use goodwill was merely a device to avoid tax. This reinforces the principle that genuine business arrangements cannot be disregarded merely on suspicion of tax avoidance.<\/p>\n<p><span style=\"color: #000080;\"><strong>ITC Benefits for Bona Fide Purchasers Upheld: <\/strong><\/span>In a landmark ruling, the Supreme Court of India held that purchaser-dealers are entitled to Input Tax Credit (ITC) even if the selling dealer fails to deposit the tax collected.<\/p>\n<p>Key Highlights:<\/p>\n<ul>\n<li>Protection of ITC: Bona fide purchasers\u2019 ITC claims cannot be denied due to the seller\u2019s default.<\/li>\n<li>Due Verification: Authorities must verify the genuineness of the transactions before granting ITC.<\/li>\n<li>Fairness Principle: The Court emphasized that genuine purchasers should not be penalized for another\u2019s fault.<\/li>\n<li>Broader Impact: Although delivered in the context of the VAT regime, the ruling is expected to influence interpretation and litigation under the GST regime as well.<\/li>\n<\/ul>\n<p><strong><span style=\"color: #000080;\">Pre-Deposit Shields Taxpayers from Recovery Actions :<\/span> <\/strong>In another crucial decision, the Supreme Court ruled that once a taxpayer has made the 10% pre-deposit required under Section 107(6) of the CGST Act for filing an appeal, the Department cannot attach bank accounts or initiate recvery proceedings. Key Highlights of SC decision on Pre-Deposit Shields Taxpayers from Recovery Actions:<\/p>\n<ul>\n<li>No Account Attachment: After the pre-deposit, further recovery or attachment of funds is prohibited.<\/li>\n<li>Deemed Stay: The pre-deposit automatically operates as a stay on recovery actions.<\/li>\n<li>Taxpayer Relief: This ruling provides significant protection to genuine taxpayers from arbitrary or coercive recovery measures.<\/li>\n<\/ul>\n<p><strong><span style=\"color: #000080;\">Similarly, a summary of the Supreme Court\u2019s ruling in <\/span><em><span style=\"color: #000080;\">Commissioner of Trade and Tax, Delhi v. M\/s Shanti Kiran India (P) Ltd.<\/span> <\/em><\/strong>This judgment indeed marks a pivotal moment in Indian tax jurisprudence. Here\u2019s a concise recap of its significance:Key Legal Takeaways Supreme Court\u2019s ruling in <em>Commissioner of Trade and Tax, Delhi v. M\/s Shanti Kiran India (P) Ltd.<\/em><\/p>\n<ul>\n<li>ITC as a Statutory Right: The Court affirmed that Input Tax Credit is not a concession but a vested right, once tax is paid on a valid invoice from a registered seller.<\/li>\n<li>No Penalization Without Fault: Bona fide purchasers cannot be penalized for the seller\u2019s failure to deposit tax unless fraud or collusion is proven.<\/li>\n<li>Constitutional Anchoring: The judgment harmonizes fiscal enforcement with Article 14 ensuring equality and protection against arbitrary action.<\/li>\n<li>Binding Precedent: The Supreme Court\u2019s endorsement of the <em>On Quest<\/em> reading down of Section 9(2)(g) now becomes binding across jurisdictions.<\/li>\n<\/ul>\n<p><span style=\"color: #000080;\"><strong>Broader Implications<\/strong><\/span><\/p>\n<ul>\n<li>GST Regime Impact: The reasoning is expected to influence GST disputes, especially where ITC is denied due to supplier-side mismatches (e.g., GSTR-2A\/2B issues).<\/li>\n<li>Global Alignment: The judgment echoes EU VAT principles emphasizing proportionality, neutrality, and legitimate expectation.<\/li>\n<li>Administrative Reform: Encourages evidence-based enforcement and discourages blanket reversals of ITC.<\/li>\n<\/ul>\n<p>Why It Matters: This ruling restores trust and balance in the tax system. It sends a clear message: compliance must be rewarded, not punished, and enforcement must be fair, proportionate, and constitutionally sound.<\/p>\n<p><strong>We provide support in various services, including:<\/strong><\/p>\n<ul>\n<li>Tax Audits &amp; Compliance<\/li>\n<li>GST Consultation &amp; Litigation<\/li>\n<li>Corporate Advisory Services<\/li>\n<li>Emerging Technologies in Finance (AI)<\/li>\n<li>Start-up Consulting &amp; Advisory<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Retrospective Amendment on ITC for Construction Costs What\u2019s Changing : A retrospective amendment, effective from July 1, 2017, prevents entities\u2014like commercial real estate companies\u2014from claiming Input Tax Credit (ITC) on goods and services used in the construction of immovable property on their own account (e.g., buildings, warehouses). The government proposes a retrospective amendment (effective from &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10020],"tags":[10308],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/28589"}],"collection":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/comments?post=28589"}],"version-history":[{"count":4,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/28589\/revisions"}],"predecessor-version":[{"id":30301,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/28589\/revisions\/30301"}],"wp:attachment":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/media?parent=28589"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/categories?post=28589"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/tags?post=28589"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}