Denial of ITC on Corporate Social Responsibility (CSR) activities – AAR Gujarat
by ReinHeads Team | Sep 17, 2021
|
AAR Gujarat* – Denial of ITC on Corporate Social Responsibility (CSR) activities
| Facts |
- Adama India Private Limited (‘the Applicant’) is engaged in supply of insecticides, fungicides and herbicides
- The Applicant spends a mandatory amount on Corporate Social Responsibility (‘CSR’) activities in the form of donations to the Government relief funds/ societies, civil works or installation of plant and machinery items in schools or hospitals, distribution of food kits etc. to comply with the requirements under the Company Act, 2013
- The Applicant intends to avail the Input Tax Credit (‘ITC’) of the following inputs and input services procured for purpose of undertaking the CSR activities:
- Books and Stationery
- Civil works, whether or not including plant and machinery items
- Plant and machinery, furniture
|
| Issues before the AAR |
- Whether the inputs and input services procured by the Applicant to undertake the mandatory CSR activities qualify as being in the course and furtherance of business and hence eligible for ITC in terms of Section 16 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’)?
|
| Discussion and Findings of the AAR |
· The AAR ruled that the Applicant is not eligible to claim ITC on the inputs and input services procured for undertaking the mandatory CSR activities on account of the following key observations:
- Rule 4(1) of the Companies (CSR Policy) Rules 2014 (for the period prior to 23-1-2021) provides that the CSR activities undertaken by a company shall exclude activities undertaken in pursuance of the normal course of business
- Section 2(d) Companies (CSR Policy) Amendment Rules 2021 (w.e.f. 23-1-2021) provides that the CSR does not include activities undertaken in pursuance to the normal course of business of the company
- Section 16(1) of the CGST Act provides that ITC can be availed if such goods/ service procured are used or intended to be used in the course or furtherance of his business
- Since, the CSR activities are not the activities undertaken in pursuance of normal course of business and hence ITC in respect of such CSR activities is not eligible under Section 16 of the CGST Act
|
*Advance Ruling No. Guj./GAAR/ R /44/ 2021 dated 11 August 2021 (The Authority for Advance Ruling, Gujarat) |
|
