Generally, taxable hotel, restaurant or event services do not by themselves make GST input tax credit available on the cost of constructing a resort. In a report dated 1 October 2026, JurisHour says the Bengaluru bench of the GST Appellate Tribunal (GSTAT) dismissed Flora Kingdom Farm Resort’s appeal, treating the resort building as constructed on the taxpayer’s own account. The complete official order was not located, so the case details below are attributed to that report rather than presented as independently verified tribunal findings.
What the Bengaluru GSTAT ruling reportedly decided
JurisHour reports that Flora Kingdom Farm Resort, a partnership firm operating in Mallar, Kaup, Udupi district, Karnataka, claimed input tax credit (ITC) on goods and services used to construct its resort. The firm provided room accommodation, restaurant and catering services, and said parts of the premises were used for weddings, events and photoshoots.
According to the report, the tribunal rejected the appeal and upheld the denial of construction-related credit under section 17(5)(d) of the Central Goods and Services Tax (CGST) Act. The reported reasoning was that the firm operated hospitality and event services from premises it controlled and managed; that did not establish that it had constructed the building for another person to use. A guest receiving a stay or an event customer receiving services was not, on those facts, the same as a tenant taking possession to use the property for their own purposes.
The report says no lease deed, licence agreement or invoice for renting immovable property was produced to show a separate property-letting arrangement. These are reported case facts; they should not be treated as confirmed wording or findings from the order without the full official judgment.
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Why business use does not automatically unlock construction ITC
Section 17(5)(d) blocks credit for goods or services received for construction of immovable property—other than plant and machinery—on the taxable person’s own account. The clause expressly includes cases where the goods or services are used in the course or furtherance of business. In other words, operating a taxable business in a building does not, by itself, remove the statutory restriction.
The Act’s explanation of “construction” includes reconstruction, renovation, additions or alterations, and repairs, to the extent their cost is capitalised. Whether a particular expenditure falls within the restriction therefore depends on the asset, the work and its accounting treatment, as well as the applicable statutory text.
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The practical distinction reported in this case is between using a building as the setting for the resort’s own hospitality or event services and constructing a property for another person to use under a genuine lease or licence. A customer buying a room, meal or event service does not automatically become a person renting the immovable property. The label “renting” in marketing or an invoice is not conclusive: the actual contract, possession, control and service delivered matter.
How a hospitality arrangement differs from property letting
| Arrangement | What the customer receives | Why it matters to the reported issue |
|---|---|---|
| Resort stay or hospitality service | Accommodation and related services supplied by the resort, with the operator retaining management and control. | The report says the tribunal treated this as the resort operating its business from its own building, not as proof that the building was constructed for another person’s use. |
| Wedding, event or photoshoot service | Use of a venue as part of an event or other service supplied by the resort. | Use of a space for an event does not alone establish a separate lease or licence of immovable property. The real contractual arrangement and conduct would need to be examined. |
| Separate lease or licence arrangement | A documented right for another person to possess or use immovable property, subject to the actual terms and performance of the agreement. | The reported case distinguished this possibility from the resort’s own service business. The report says the firm did not produce a lease deed, licence agreement or rental invoice establishing such an arrangement. |
This is a way to frame the factual question, not a universal test that determines ITC for every resort or venue. A genuine letting arrangement still needs to be assessed against the statute and the complete facts.
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Construction costs and movable assets need separate analysis
The reported decision concerned credit claimed for construction of the resort building and civil structures. It should not be read as a finding that every purchase made by a resort is blocked. Section 17(5)(d) addresses specified inputs used to construct immovable property on the taxpayer’s own account; an independently usable movable item may require a different analysis under the relevant ITC rules.
- Building and civil works: assess whether the expenditure is for construction of immovable property and whether it is capitalised.
- Furniture or equipment: determine whether the item is independently movable or forms part of the immovable property, and check the other statutory conditions for credit.
- Mixed projects: identify the specific goods and services claimed, rather than assuming that the answer for the building automatically applies to every asset at the resort.
Retrospective amendment: distinguish a Council recommendation from enacted law
The GST Council’s press release for its 55th meeting said the Council recommended replacing “plant or machinery” with “plant and machinery” retrospectively from 1 July 2017, so the phrase would be read consistently with the Act’s existing explanation. A Council press release records a recommendation; it is not itself the amending enactment. For a current claim or dispute, check the enacted amending legislation and a current consolidated version of the CGST Act rather than relying on a press release or an older bare-act text alone.
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The distinction matters because a building’s commercial importance or business use is not, by itself, a substitute for applying the statutory definition and the specific blocked-credit rule. The CBIC-hosted statutory text consulted for the reported legal framework was amended only up to 1 January 2022, so it should not be treated as a current consolidated version.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Reported demand for FY 2019–20
JurisHour reports that the demand upheld for financial year 2019–20 was ₹9,32,177: ₹8,45,972 in tax, ₹1,607 in interest and ₹84,598 in penalty. Those components total the stated demand. Because the complete official order was not located, treat the figures as the report’s account, not as independently confirmed tribunal figures.
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What a resort operator should review before claiming construction ITC
A business assessing a similar claim should review the transaction and each asset rather than relying only on the fact that the premises earn taxable revenue.
- Identify the claim: separate building and civil-work costs from furniture, equipment and other purchases.
- Check the asset and accounting: establish whether the item is immovable property, plant and machinery, or an independently usable movable asset, and whether the cost was capitalised.
- Trace the customer arrangement: distinguish accommodation, catering and event services from a grant of possession or use under a lease or licence.
- Compare documents with actual conduct: review contracts, invoices, site control and how the premises are operated. A contract label alone may not describe the arrangement that was actually performed.
- Apply the current law: confirm the operative statutory wording and all other ITC conditions for the relevant tax period before filing or contesting a claim.
The case report offers a warning about treating taxable resort activity as sufficient grounds for credit on the building. It does not settle the ITC treatment of every resort asset or every separately documented letting arrangement. A definitive position depends on the current law and the taxpayer’s contracts, invoices, accounting and actual use.
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