Budget 2025's retrospective GST amendment by the Centre may undergo legal examination

2025-02-10 03:06:03

The Finance Ministry's review petition is anticipated to be heard by the end of February, when the Supreme Court may determine the validity of the amendments.

The Centre’s retrospective amendment to the Goods and Services Tax (GST) Act in the Union Budget 2025-26 may undergo legal scrutiny, as the government’s review petition on a related case is expected to be taken up by the Supreme Court in the coming weeks, according to tax experts.

The case involves Section 17(5) of the GST Act, which restricts eligibility for Input Tax Credit (ITC) on specified items. The amendment follows an October 11, 2024, Supreme Court ruling that allowed infrastructure firms to offset GST paid on construction materials against GST payable on rental income from such properties.

Experts suggest that, even with the amendment, ITC should still be permitted for real estate assets created for leasing. They emphasize the need for government clarification and call for a policy review by the GST Council. If upheld, the amendment could significantly impact real estate firms by increasing construction costs and limiting ITC eligibility.

Legal analysts also highlight concerns about retrospective amendments, which have previously been ruled unconstitutional in certain cases. If challenged, the amendment could face prolonged litigation, affecting industry stakeholders.

The Supreme Court's interpretation of the review petition and the broader implications of retrospective taxation will be crucial in shaping the future of GST regulations and real estate taxation in India.