In Brief
The Supreme Court upheld the constitutional validity of clauses (c) and (d) of Section 17(5) of the CGST Act, which bar input tax credit on goods and services used to construct immovable property. The Court held that "plant or machinery" in clause (d) has a different meaning than "plant and machinery" as defined elsewhere—the legislature deliberately used different expressions. Whether a building (other than hotels or cinemas) qualifies as a "plant" is a factual question to be decided using a functionality test: if the building is essential for supplying taxable services like renting or leasing under Schedule II, it may be treated as a plant and thus entitled to ITC. The provisions are constitutional and do not violate Article 14; the classification based on immovable property has rational nexus to the object of respecting State taxation powers over land and buildings. The cases were remanded to the High Court to determine, on facts, whether specific shopping malls and other buildings satisfy the functionality test.
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