Safari Retreats: what the Supreme Court actually held - and what it doesn't
The Supreme Court's 2024 ruling in Safari Retreats reopens ITC on construction in narrow circumstances - but the carve-out is more nuanced than the headlines suggest.
Safari Retreats: what the Supreme Court actually held
The Supreme Court's October 2024 ruling in Safari Retreats Pvt Ltd v. Chief Commissioner of CGST has been read by many as a complete reversal of Section 17(5)(d) of the CGST Act. It isn't. Here's the precise position.
Facts
Safari Retreats is a developer of shopping malls. The builder claimed ITC on inputs and input services used in construction of a mall let out on rent. The department denied ITC under Section 17(5)(d), which blocks ITC on "construction of immovable property on own account".
Issue
Whether the Section 17(5)(d) bar applies when the building is let out (functional test) versus sold (capital test).
Held
The Supreme Court applied the "plant" test. Where the building functions as plant from which the supplier earns taxable rental income, ITC should be available - even though it is "immovable property" in the conventional sense.
Ratio
Section 17(5)(d) is not absolute. The "plant" exception applies on a functional analysis, fact-by-fact. A mall let out for rent qualifies as plant; a residential apartment sold post-completion does not.
What this changes - and doesn't
Changes:
- Mall, hotel, cold-storage, warehouse, multiplex developers can claim ITC where the property is let out and generates taxable output (typically 18% GST on rent for commercial property).
- A specific functional analysis must be filed with each claim.
Doesn't change:
- Construction for own use (office, factory, etc.) - ITC still blocked.
- Construction of residential property sold post-completion - outside GST entirely; ITC is moot.
- Construction for non-taxable output - ITC still blocked under Section 17(2).
Operational guidance
For practitioners, CBIC Circular 220/2025-GST (dated 15 October 2025) issued post-Safari Retreats specifies:
- Each ITC claim under the Safari Retreats principle must be supported by a functional analysis showing that the building generates taxable rental income.
- An advance ruling is recommended for marginal cases.
- The ITC is proportionate if the building is partly used for exempt supplies (residential apartments within a mixed-use building).
Cross-references
- Statute: Section 17(5)(d), CGST Act
- Case: Safari Retreats Pvt Ltd v. Chief Commissioner of CGST
- Earlier case: TVL Transtonnelstroy Afcons JV v. UOI - Madras HC predecessor
- Circular: CBIC 220/2025-GST
- Reviewed by CA Priya Narayanan, Head of GST Practice