Retrospective CGST Amendment Shakes Real Estate Sector

The government's retrospective change to the CGST law, altering 'plant or machinery' to 'plant and machinery', may disrupt real estate companies' input tax credit claims. This amendment follows a Supreme Court ruling and could lead to industry-wide compliance challenges and potential litigations.

The government has proposed a retrospective amendment to the Central Goods and Services Tax (CGST) law concerning 'plant or machinery'. This alteration, experts suggest, could impact real estate companies' ability to claim input tax credit on construction and leasing of commercial assets.

The change comes in light of a Supreme Court ruling related to input tax credit. The government is replacing 'plant or machinery' with 'plant and machinery' under a section of the CGST Act, effective from July 1, 2017. This amendment could affect businesses' compliance and financial strategies.

Deloitte India's Harpreet Singh indicated this move negates the Supreme Court's previous decision in the Safari Retreats case. The change underscores the strict stance on denial of GST credits for construction activities, potentially leading to disputes over past tax periods.