Retired Government Employee Constructing Commercial Building on Own Land for Rental Income Is Carrying on 'Business' Under GST — Safari Retreats Ratio Inapplicable After Retrospective Section 17(5)(d) Amendment: Maharashtra AAR

The Maharashtra Authority for Advance Ruling has held that a retired municipal engineer who constructs a commercial building on his own land using surplus savings and sells some units while retaining others for rental income is carrying on an activity "in the course or furtherance of business" within the meaning of Section 7 read with Section 2(17) of the CGST Act — and that consequently, both the sale of commercial units and rental income are taxable under GST. The Authority further held that the retrospective amendment to Section 17(5)(d) by the Finance Act, 2025 — substituting "plant or machinery" with "plant and machinery" — renders the Supreme Court's ruling in Safari Retreats inapplicable, and ITC on construction inputs remains blocked for units leased out for rent. The ruling was passed by Shri Dipak Gojamgunde and Smt. Himani Dhamija in GST-ARA-54/2020-21/B-51 on 30.03.2026.

Mr. Sunil Khune, a retired City Engineer of Nashik Municipal Corporation, and his wife purchased a plot in Nashik in 2003 as a personal capital asset. After demolishing the old structure, they obtained building permission, RERA registration (for project "ONE GANGAPUR"), and TDR, and commenced construction of a commercial building. The applicant's case was that since he was never in any business activity, the construction was purely for generating post-retirement rental income, and that any sale of units was merely to finance the construction — not a business activity. The applicant relied heavily on Income Tax precedents (Sushila Devi Jain, Suresh Chand Goyal, Om Prakash Arora) holding that sale of capital assets by non-business persons does not constitute business income.

The Authority rejected this contention comprehensively. Under Section 2(17)(c) of the CGST Act, "business" includes any activity or transaction in the nature of trade, commerce or similar activity "whether or not there is volume, frequency, continuity or regularity of such transaction" — a crucial widening beyond the Income Tax definition. The Authority held that the GST definition is self-contained and when the term is expressly defined, there is no need to import judicial interpretations from other statutes. The source of funds (personal savings vs. borrowings) is irrelevant, as is the applicant's lack of prior business experience or intention to repeat the activity.

On ITC, the Authority made an important distinction: for commercial units sold to buyers before receipt of the Occupation/Completion Certificate, proportionate ITC on inputs is available, as the construction is not "on the applicant's own account" to that extent. But for units retained for leasing, ITC is blocked under Section 17(5)(d). Critically, the Authority held that the retrospective amendment by Section 124 of the Finance Act, 2025 — changing "plant or machinery" to "plant and machinery" in Section 17(5)(d) — means the defined term "plant and machinery" (which excludes land, buildings and civil structures) now governs, and the functionality test prescribed by the Supreme Court in Safari Retreats no longer applies. The press release on sale of old gold by individuals was also distinguished: in that case, the person was disposing of used personal goods, not constructing and selling commercial property for profit.