Government considers review Plea in Safari Retreats case

The government is considering submitting a review petition against the Supreme Court’s decision in Safari Retreats, which allows commercial real estate companies to claim input tax credits (ITCs) on construction costs for rental buildings. According to sources familiar with the situation, this verdict may have an impact on government revenue, resulting in a shortage of roughly Rs 5,000 crore.

Following the Supreme Court’s judgment, companies across industries have begun seeking adjudicating authorities to determine their eligibility for ITC. “The law committee has been tasked with evaluating whether the government should pursue a review of the Supreme Court’s order,” said a senior government official.

Petitioners may also request a review of specific portions of the judgment. “There are a few aspects that are under consideration and we may file a review petition for reconsideration for limited aspects,” the tax professional stated.

“In some cases, companies have obtained credit but have yet to use it due to the prolonged litigation. The adjudicating authorities would have to determine the strategy based on the principles established by the court,” he added.

This decision establishes key legal rules regarding the interpretation of input GST credit restrictions under Section 17(5)(d).

Although these legal principles were articulated in the context of a commercial real estate business (because that was the lead matter before SC), they can also be applied in a broader sphere, such as by concessionaires operating ports, airports, or similar projects under a PPP model or LNG regasification terminals, or by manufacturing entities that have incurred/plan to incur significant input side capital expenditure (and GST).

According to sources, enterprises seeking clarity include those currently in conflict with the tax department over denied credits, as well as those who have claimed ITC but have yet to use it. If the government decides not to file a review, adjudicating authorities will consider these companies’ eligibility for ITC on construction expenditures based on essentiality and functioning criteria.

Another tax professional said, “The decision calls into question existing GST regulations, perhaps resulting in an increase in previously denied ITC claims. This decision might considerably limit the government’s tax collection and prompt a rethinking of GST rules to defend revenue interests.”