GST Input Tax Credit Blocked for Warehouse Construction
The Gujarat Authority for Advance Ruling confirmed that businesses cannot claim GST input tax credit on construction costs for warehouses.
- Ruling
- GUJ/GAAR/R/2025/62 dated 23.12.2025
- Dated
- 23 Dec 2025
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- The company asked if they could claim GST credit for warehouse construction.
- The Authority ruled that such credit is strictly blocked.
- Recent legal amendments now explicitly exclude buildings from credit eligibility.
In short
The company asked the Gujarat Authority for Advance Ruling (GAAR) if they could claim Input Tax Credit (ITC) on the goods and services used to build a warehouse. The authority decided that because the warehouse is a civil structure, the tax paid on its construction cannot be recovered as credit. This decision follows a recent change in the law that specifically targets and blocks these types of claims.
What has changed
How it worked before
Businesses previously argued that if a warehouse was used to provide taxable storage services, the construction costs should qualify for credit, often citing the Safari Retreats court case.
What has changed
The Finance Act of 2025 amended Section 17(5)(d) of the CGST Act to explicitly exclude land, buildings, and civil structures from credit eligibility. This means that even if you use the building to run a business that charges GST, you cannot claim the tax paid on the construction materials or services.
Who this affects
Warehouse owners, logistics companies, and any business constructing buildings for commercial rental or storage services.
An example
A logistics firm in another state is building a new cold storage facility. They were hoping to claim the GST paid on cement and steel as input tax credit. Based on this ruling, they should expect their local tax officer to deny that claim because the law now clearly classifies the warehouse as a blocked civil structure.
What you should do
You should treat all GST paid on construction materials and services for warehouses as a final cost rather than a recoverable credit. Remember that this ruling only applies to the specific company that asked the question; it is not a universal law, but it reflects how the tax department will interpret the new amendment for everyone.
If you do nothing
If you claim this credit anyway, you risk a tax audit and a demand notice for the amount plus interest and penalties. Tax officers are now empowered by the new amendment to reject these claims during scrutiny. Relying on old court cases that have been overridden by new laws is a common way to trigger an expensive tax dispute.
The terms explained
- Input Tax Credit
- The GST you pay on your business purchases that you can subtract from the GST you owe on your sales.
- Section 17(5)(d)
- A specific part of the GST law that lists items for which you are not allowed to claim tax credit.
- Civil structure
- Any permanent building or construction, such as a warehouse, shed, or office, that is fixed to the ground.
The ruling in detail
Authority for Advance Ruling
PREMLATA RAKESH JAIN [Trade Name:- M/s Sambhav Warehousing]
GUJ/GAAR/R/2025/62 dated 23.12.2025 · Gujarat
Questions before the authority
- Whether ITC is admissible for the goods or services utilized for the construction of warehouse or shed from which storage and warehousing services are provided as furtherance of business or provided on rent.
Facts
The applicant is engaged in the business of providing storage and warehousing services and is constructing a warehouse. They sought an advance ruling on the admissibility of Input Tax Credit (ITC) for goods and services used in the construction of this warehouse, specifically in light of the Supreme Court judgment in the Safari Retreats case.
Ruling
| Question | What the authority ruled |
|---|---|
| Admissibility of ITC for warehouse construction | No The applicant is not eligible to avail ITC on construction materials and services used for the warehouse. |
The Authority ruled that the applicant is not eligible to avail ITC on the goods and services used for the construction of the warehouse. It concluded that the recent legislative amendments have nullified the effect of the Safari Retreats judgment regarding the interpretation of Section 17(5)(d).
Reasoning
The Authority noted that Section 17(5)(d) of the CGST Act was amended by the Finance Act, 2025, to substitute the term 'Plant or Machinery' with a definition that explicitly excludes land, building, or any other civil structures. This amendment, effective from 01.10.2025, was specifically designed to override the functional test interpretation established in the Safari Retreats case. Consequently, the construction of a warehouse falls under the blocked credit category as it constitutes a civil structure.
Provisions relied on
- Section 17(5)(c) of the CGST Act, 2017
- Section 17(5)(d) of the CGST Act, 2017
- Section 124 of the Finance Act, 2025
- Notification No. 16/2025-CT dated 17.09.2025
For the practitioner
This ruling confirms that the **legislative amendment** to Section 17(5)(d) has effectively closed the window for claiming ITC on construction expenses for warehouses, even if used for business purposes. It clarifies that the **functional test** approach from the Safari Retreats case is no longer applicable for such construction. Practitioners should advise clients that ITC on civil structures for warehousing is now **strictly blocked**.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/3-premlata_rakesh_jain.pdf
Legibility of the scan, as read: high.
Prepared 12-10-2026.
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