No ITC available for CSR Activities excluded from Normal Course of Business: AAR

16-Dec-2021 Admin 4 Authority Of Advance Ruling, AAR, Input Tax Credit, ITC, GST On CSR Activities, CGST 622 Views

The Gujarat Authority of Advance Ruling (AAR) ruled that no Input Tax Credit (ITC) available for CSR activities was excluded from normal course of business.

The applicant, M/s. Adama India private limited, supplies insecticides, fungicides and herbicides. The applicant submits that as per Section 135 of the Companies Act, 2013, it has been spending the mandatory amount on CSR activities in the form of donations to the Government relief funds/educational societies, civil works or installation of plant and machinery items in schools or hospitals, distribution of food kits etc; that the vendors that supply goods/services to the applicant for the purpose of undertaking the CSR activities charge GST on their output supplies; that the applicant intends to avail the Input Tax Credit (ITC) of the inputs and input services being procured for the purpose of undertaking the CSR activities.

The applicant has sought the advance ruling held that whether the inputs and input services procured by the applicant, in order to undertake the mandatory CSR activities as required under the Companies Act, 2013, qualify as being in the course and furtherance of business and therefore will be counted as eligible ITC in terms of Section 16 of the Central Goods and Services Tax Act, 2017.

“In pursuance to Companies CSR Rules framed by the Central Government and in pursuance to wordings of Section 16(1) CGST Act, we disagree with both the applicant’s and revenue’s stand for admissibility of ITC on CSR activities. In fact, we note that the applicant submitted that CSR activities being undertaken by the applicant can become eligible for ITC if only it is established that such activities are in the course and furtherance of business. As per law, Section 16(1) CGST Act bars CSR activities from ITC,” the AAR observed.

The coram of Sanjay Saxena and Arun Richard held that CSR activities, as per Companies (CSR Policy) Rules, 2014 are those activities excluded from normal course of business of the applicant and therefore not eligible for ITC, as per Section 16(1) of the CGST Act.

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