CSR expenditure under GST regime

 CSR expenditure under GST regime


Section 16(1) of CGST Act, 2017 provides that input tax shall be allowed on goods or services which are used or intended to be used in the course or furtherance of business. Further, Section 17(5) disallows credit on certain goods and services.

It is pertinent to note that the GST provisions do not specifically allow or disallow input tax credit on CSR expenses. Further, there is no explanation similar to what is available under the Income Act. Thus, one may take a view that credit is available under GST. However, department places reliance on clause (h) of section 17(5) to disallow CSR related credit which restricts ITC on goods given in the form of gifts.

Yes
M/S. BAMBINO PASTA FOOD INDUSTRIES PRIVATE LIMITED - 2022

(11) TMI 482 - AUTHORITY FOR ADVANCE RULING, TELANGANA

No
M/S. DWARIKESH SUGAR INDUSTRIES LIMITED - 2020 (1) TMI 1430

-AUTHORITY FOR ADVANCE RULING, UTTAR PRADESH

M/S. ADAMA INDIA PRIVATE LIMITED- 2021 (9) TMI 1061 – AUTHORITY FOR ADVANCE RULING, GUJARAT

M/S. POLYCAB WIRES PRIVATE LIMITED - 2019 (4) TMI 111 – AUTHORITY FOR ADVANCE RULINGS, KERALA

Considering this confusion on ITC eligibility, the Government decided to introduce amendment in Section 17(5) of the CGST Act, 2017

Finance Bill, 2023

The Government inserted clause (fa) in Section 17(5) of the CGST Act, 2017 which reads as under:
Section 17(5). Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely: -

“(fa) goods or services or both received by a taxable person, which are used or intended to be used for activities relating to his obligations under corporate social responsibility referred to in section 135 of the Companies Act, 2013;”

The amendment states that input tax credit on goods and services received by companies to undertake CSR activities under section 135 of Companies Act, 2013 is not allowed. The amendment will come into effect from the date to be notified.

Potential issues in the amendment
i. Whether companies can take credit of procurements made until this new provision is notified?

ii. What is the scope of the phrase “activities relating to his obligations under CSR”?
iii. What is the meaning of the phrase “intended to be used”?
iv. Whether credit is allowed if CSR expenditure is incurred by the Company over and above the mandatory threshold?

v. Whether credit is allowed if CSR expenditure is incurred by partnership firm, etc.?

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