The 55th GST Council Meeting is chaired by Union Finance Minister Nirmala Sitharaman, which is likely to discuss the proposal to retrospectively amen the Central Goods and Services Tax (CGST) Act.
This would reverse the recent ruling in the Safari Retreats case by the Supreme Court. In October, the Apex court granted input tax credit (ITC) applications for rental property development costs.
The judgement of the Supreme Court on the expression “plant or machinery” appears to defeat the intention of the GST Council.
The bench of Justice Abhay Oka and Justice Sanjay Karol has ruled that if the construction of a building was essential for carrying out activity of supplying services such as renting or giving on lease or other transactions in respect of the buildings or part thereof which are covered by clauses 2 and 5 of the Schedule 2 of the CGST Act, the building could be held as a plant. A Functional test will have to be applied to decide whether the building is a plant.
Relevant Provisions – GST Applicability
The CGST Act was implemented with effect from 1st July, 2017 inter alia with the object of avoiding the cascading effect of various indirect taxes and so as to reduce the multiplicity of a number of indirect taxes.
The CGST Act is based on the VAT concept of allowing input tax credit of tax paid on inputs, input services and capital goods which can be utilised for payment of output tax so as to obviate the cascading effect of multistage levies and taxes. GST is levied on supply of goods or services or both, in India w.e.f. 1st July, 2017.
Each State Government has passed its own State GST Act to impose GST on the supply of goods or services or both within the State and these State GST Acts are practically copies of CGST Act, as the definitions and other provisions are identical. For the purpose of imposing GST within the State of Odisha, Government of Odisha has passed OGST Act in which almost all the provisions are virtually identical to that of CGST Act.
The business of the company in the present case inter alia consists of construction of shopping malls and letting them out to different persons on rental basis and collection of rent from them. In view of Section 7 of CGST Act and OGST Act read with Schedule II of the GST Acts.
The activity of the Company of letting out of the units of the shopping mall to different persons amounts to “Supply” within the meaning of both the two Acts and as such the petitioner No.1 squarely comes within the definition of ‘supplier’ as appearing in Section 2(105) of both the GST Acts and the Petitioner is liable to pay CGST and OGST on the rental amounts received by it.
Section 22(1) of CGST Act as well as OGST Act inter alia provide that every supplier shall be liable to be registered under the CGST Act and OGST Act in the State from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees.
Company duly applied for such registration and a certificate of registration was issued to the petitioner No.1 in Form GST REG-06 under Section 25 of the CGST Act read with Rule 10 of the Central Goods and Service Tax Rules, 2017 and a Goods and Service Tax Identification Number was assigned to the company. Once the Company is registered under Section 22 of the CGST Act, it becomes the “Taxable person” within the definition as contained in Section 2 (107) of the CGST Act and OGST Act.
Section 9 of the CGST Act is the charging section provides that subject to the provisions of Section 9 (2). There shall be levied a tax called the Central Goods and Service Tax on all intra-State supplies of goods or services or both.
Except on the supply of alcoholic liquor for human consumption, on the value determined under Section 15 of the CGST Act and at such rates, not exceeding twenty percent, as may be notified by the Government on recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. Similar provisions in the State Act namely OGST Act have also made under Section 9 of the Act.
