This particular writ intends to challenge the constitutional validity of the provisions contained in section 17(5)(c) and 17(5)(d) of the Central Goods and Services Tax Act, 2017 (“CGST Act, 2017”) and the Gujarat Goods and Services Tax Act, 2017 (“GGST Act, 2017”) pertaining to blocked credits concerning construction of immovable property to be used in the course or furtherance of business.
The Petitioner argues that the particular provisions in question have been enacted without taking into consideration the main object of implementation of GST and lack of thought on part of the lawmakers.
The petitioners also contended that the provisions contained in section 17(5)(c) & 17(5)(d) are against the statement of object and reasons of GST which is to reduce tax cascading and enabling seamless transfer of input tax credit from one stage to another in the chain of value addition.
The petitioners seek that the above provisions be declared to be ultra-vires of Article 14 of the Constitution of India and a High-level committee be formed for addressing the interpretational issues created by these provisions.
Whether the provisions of Section 17(5)(c) and 17(5)(d) of the CGST Act, 2017 are constitutionally valid or not?
The Hon’ble Gujarat HC via oral order in the matter of Special Civil Application No. 16793 of 2019 dated October 3, 2019, has issued a notice in this direction to the revenue and further Lists matter on November 13, 2019
The vires of blocked credit have also been challenged before the Rajasthan HC in the case of Kamal Cogent Energy Private Limited [TS-965-HC-2019(RAJ)-NT] and the Delhi HC in case of Bamboo Hotel and Global Center (Delhi) Pvt Ltd. [TS-963-HC-2019(DEL)-NT.
Section 17(5) of the CGST Act, 2017: Blocked Credits:-
(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, the input tax credit shall not be available in respect of the following, namely:-
(c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;
(d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.
Explanation.––For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property;
Explanation.–– For the purposes of this Chapter and Chapter VI, the expression “plant and machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making an outward supply of goods or services or both and includes such foundation and structural supports but excludes-
(i) the land, building or any other civil structures;
(ii) telecommunication towers; and
(iii) pipelines laid outside the factory premises.