SC Dismisses Review Petition in the Safari Retreats Case, Reaffirming ITC Can Be Claimed for Leasing

On Tuesday, the Supreme Court rejected the Finance Ministry’s request to review its earlier decision in the Safari Retreats case. The court had previously ruled that commercial real estate companies can claim input tax credit (ITC) on the money spent to construct buildings that will be rented out.

A two-judge bench of the Supreme Court, made up of Justices Abhay S Oka and Sanjay Karol, gave the order on May 20, 2025. They said there was no clear mistake in their earlier judgement from October 3, 2024. The court added that, in the interest of justice, it was ignoring the issues raised by the court office and accepting the delay in filing. The review petition was officially rejected.

In the Union Budget 2025, released on February 1, 2025, the Finance Ministry made an amendment to the Central Goods and Services Tax (CGST) Act that was made effective from July 1, 2017. This change was made through the Finance Bill and changed the words “plant or machinery” to “plant and machinery” in Section 17(5)(d). The goal of this amendment was to stop businesses from claiming input tax credit (ITC) on construction costs for buildings they plan to lease out, effectively cancelling the impact of the earlier Supreme Court ruling in the Safari Retreats case.

The case started with Safari Retreats Private Limited, a company that builds and rents out shopping malls. The company claimed ITC on the materials and services used to build these malls. However, tax officials rejected the claim, referring to Section 17(5)(d) of the CGST Act, which limits ITC on building immovable property. In October 2024, the Supreme Court made the decision in favour of Safari Retreats, saying there is a difference between using the property for personal use and using it for business purposes like leasing. The court permitted ITC claims when the property is leased out for business.