Short answer: credit on constructing immovable property on your own account is blocked. The Supreme Court briefly opened a functional test that could have treated a building as plant; the Finance Act 2025 substituted the wording retrospectively to 1 July 2017 and closed it. Credit on plant and machinery itself survives — and the money is now in where that boundary falls.
The block
Input tax credit is denied on goods and services received for the construction of immovable property on one's own account, even where the property is used in the course of business.
For a manufacturer this reaches the factory building, the shed, the warehouse, the boundary wall and the civil works — the substantial part of a greenfield capex programme. Credit on the plant and machinery installed inside it is not blocked.
What Safari Retreats opened
The provision blocking credit on construction used the phrase "plant or machinery". Elsewhere the Act uses a defined term, "plant and machinery", which expressly excludes land, buildings and other civil structures.
The Supreme Court held that the difference could not be treated as accidental. If the blocking clause said plant or machinery rather than the defined plant and machinery, then "plant" in that clause carried its ordinary meaning — to be tested functionally, by what the structure does in the business.
On that reasoning a building constructed to be let out as part of a taxable business could qualify as plant, and the credit would not be blocked.
What the amendment closed
The Finance Act 2025 substituted "plant and machinery" for "plant or machinery", with effect from 1 July 2017 — the day GST commenced.
That removed the textual distinction the entire judgment rested on, and removed it from the beginning. The judgment interpreted the provision as enacted; the provision as it now reads, for all periods, says something different.
The Supreme Court subsequently dismissed a review petition, so the judgment stands as a judgment. The statute it construed no longer stands in that form.
Where that leaves you
Three positions, and they are genuinely different:
| Situation | Position |
|---|---|
| New claims on construction | The functional-plant route is closed. Credit is blocked |
| Credit already taken in reliance on the judgment before the amendment | Retrospective reversal of a settled judicial outcome — a real argument exists, and the facts of when and why the credit was taken matter |
| Plant and machinery itself | Unaffected. Credit available as before |
The middle row is where advice actually matters, and it is fact-specific. A retrospective amendment that reverses a decided case is open to constitutional challenge on established grounds. That is an argument, not an assurance — but it is a materially better argument for someone who acted on the law as declared than for someone claiming afresh today.
Neither overstatement helps. The judgment is not still good law for new claims. The amendment is not beyond question for claims already made.
Where the money actually is now
With the building route closed, the recoverable value sits at the boundary of the defined term — which covers apparatus, equipment and machinery fixed to earth by foundation or structural support, and expressly excludes land, buildings and civil structures.
The contested items are predictable:
- Foundations and structural supports built specifically for machinery — inside the definition, but only if identified as such.
- Electrical installations — substation, transformers, distribution — depending on whether they are treated as part of the plant or part of the building.
- Utility systems — compressed air, effluent treatment, process piping — often functionally plant, frequently capitalised as civil work.
- Fixtures and pre-engineered structures housing process equipment.
The determining factor is usually not the law but the paperwork: how the contract is specified, how the invoice describes the work, and how the asset is capitalised in the fixed asset register. A single works contract for "civil and structural work" makes an argument that a properly split contract would not have needed.
That is a decision taken during capex, and it is close to unfixable afterwards.
Practical steps on a live project
- Split contracts between building work and plant, machinery and installation rather than awarding a composite works contract.
- Ensure invoices describe what was actually supplied, matching the split.
- Align the fixed asset register classification with the credit position — an asset capitalised as building and claimed as plant is an obvious inconsistency.
- Document the functional role of contested items at the time, not in reply to a notice years later.
- Where credit was taken pre-amendment, establish the dates and the basis now, while the record is available.
For how blocked and reversed credit interacts with what appears in your returns, see input tax credit and GSTR-2B.
This is a working reference, not the statute, and this area is moving. For anything you are relying on, confirm the current position directly.