ISSUE:
Whether a shopping mall or similar leased property can qualify as "plant" under Section 17(5)(d), allowing ITC on its construction costs if it is essential to generating taxable supplies?
Whether denying ITC for leased commercial property contradicts the GST system’s goal of minimizing cascading taxes and ensuring tax neutrality?
Whether Section 17(5)(d) infringes upon Articles 14 and 19(1)(g) of the Constitution by creating arbitrary distinctions among taxpayers and restricting their right to carry on business?
RULE:
Section 17(5)(d) of the CGST Act restricts Input Tax Credit (ITC) on construction-related expenses for immovable property, even if that property is used for generating taxable supplies, such as rental income.
The restriction reflects legislative intent to prevent ITC misuse, particularly where properties are created for self-use and not further taxable supply.
The “functionality test” is a key criterion: properties integral to business operations (e.g., "plant" that directly supports taxable supply) may be eligible for ITC under Section 17(5)(d).