Safari Retreats Pvt Ltd v Chief Commissioner of CGST

Facts

• Safari Retreats constructed a commercial mall in Odisha
• It leased commercial space to tenants (renting of immovable property is a taxable supply under GST)
• Safari claimed ITC on goods and services used in construction (cement, steel, contractors, architects)
• The department denied ITC citing S.17(5)(d): ITC blocked for construction of immovable property "on own account"
• Safari challenged the provision as unconstitutional for creating a cascading effect contrary to GST principles

Issues

1. Whether S.17(5)(d) applies when the constructed property is used exclusively for taxable outward supplies (leasing)
2. Whether blocking ITC on construction used for taxable supply violates Article 14 and the GST framework's non-cascading objective

Held

• The matter raises substantial constitutional questions regarding the scope of ITC blocking provisions
• A strong prima facie case exists that denying ITC on inputs used for taxable output supply creates an impermissible cascading effect
• The provision appears to create an unreasonable classification between taxpayers who buy property and those who build it
• Matter referred to a larger bench / Supreme Court for final determination

Ratio Decidendi

GST's foundational principle is elimination of cascading taxes through seamless ITC. Blocking credit on inputs used exclusively for taxable supply reintroduces the cascade that GST was designed to eliminate. S.17(5)(d) must be read in light of the scheme of the Act and Article 14: if the ultimate output is taxable, denying credit on inputs used to create the output supply lacks rational nexus.