Can we claim ITC on constructing our own factory building?

Generally no. Credit on goods and services used for construction of immovable property on one's own account is blocked, and the route that briefly appeared to open — treating a functionally essential building as plant — was closed by a retrospective amendment. Credit on plant and machinery itself remains available; the block bites on the building.

What did the Safari Retreats judgment actually decide?

The Supreme Court held that whether a building is plant should be tested functionally — by what it does in the business rather than by what it is made of — which opened the possibility of credit on a commercial building constructed for taxable leasing. It turned on the statutory words 'plant or machinery' in one clause differing from the defined term 'plant and machinery' used elsewhere.

If the Supreme Court allowed it, how is it now blocked?

Parliament changed the words. The Finance Act 2025 substituted 'plant and machinery' for 'plant or machinery' with effect from 1 July 2017 — the date GST itself commenced. The judgment interpreted the provision as it stood; the amendment removed the distinction the judgment relied on, and did so retrospectively.

Does a retrospective amendment reaching back seven years actually stand?

It is on the statute book and the department will apply it. Retrospective amendments that reverse a judicial outcome are open to constitutional challenge, and taxpayers who acted on the judgment before the amendment are in a genuinely different position from those claiming afresh afterwards. Anyone presenting the position as entirely settled is overstating it in one direction; anyone treating the judgment as still good law for new claims is overstating it in the other.

What can a manufacturer still claim credit on?

Plant and machinery in the ordinary sense — the equipment, and the apparatus, fixtures and structural supports that fall within the defined term. The practical work is at the boundary: foundations and structural supports for machinery, electrical installations, and utility systems can sit on either side depending on how they are specified and capitalised. The classification decisions made during capex are what determine the answer later.

ITC on Factory Construction: Where 17(5) Blocks It

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.

Credit on what you build: the Safari Retreats route, and the amendment that closed it