Supreme Court Decision on GST for Building Construction

The Top Court in an important judgement has declined the challenge to the constitutional validity of certain statutory provisions concerning input tax credit on construction of buildings. It is notable that input tax credit is the bedrock of the GST system in India.

The judgment affirmed the distinction between “plant or machinery” and “plant and machinery” both of which expressions are used in the tax statute, and further ruled that the former phrase is more expansive although un-defined by the statute.

In effect, the Apex Court ruled that in certain factual circumstances, a building could qualify or constitute a plant for a taxpayer, and after applying the functional test, input tax credit should be allowed. A ‘one size fits all’ position cannot be laid down, and so, the Court directed that a factual enquiry be undertaken in each case.