Page 44 - GSTL_2nd April 2020_Vol 35_Part 1

INPUT TAX CREDIT ON CORPORATE
SOCIAL RESPONSIBILITY ACTIVITIES

By
Rupali Singh
ADVOCATE, RAJESH KUMAR & ASSOCIATES

Goods and Services Tax was developed so that
there shall be no cascading effect of taxes. Input Tax Cred-
it (ITC) under GST regime removes the cascading effect of
taxes. However, many restrictions were placed on ITC
provisions related to tax credit, resulting in confusion in the regime. In this arti-
cle, we shall examine the availability of ITC on goods or services received for
fulfilling Corporate Social Responsibility (CSR).
The Corporate Social Responsibility requirement in India is governed by
Section 135 of the Companies Act, 2013 and Rules made thereunder. India is the
first country in the world to make Corporate Social Responsibility (CSR) manda-
tory, through an amendment to the Companies Act in April, 2014. Businesses are
required to spend a part of their profits in areas such as education, poverty, gen-
der equality, and hunger as part of any CSR compliance.
To do the CSR activity, businesses are required to procure goods and
services on which appropriate amount of GST is paid by them. The question is -
“whether ITC of such GST paid on goods or services procured for CSR activities
is available to them or not?”
Eligibility of ITC is determined in terms of Section 16 of the CGST Act
which provides that every registered person shall be entitled to take credit of
input tax charged on any supply of goods or services or both to him which are
used or intended to be used in the course or furtherance of his business. CSR ac-
tivities are mandatory statutory requirement of a business, and no business can
be lawfully carried out without doing CSR activities. Hence, input tax received
on goods or services, used in CSR activities are lawful use in carrying on a busi-
ness.
In Re : Polycabs Wire Pvt. Ltd. [2019 (24) G.S.T.L. 103 (A.A.R. - GST)],
authority of Advanced Ruling under GST came to the conclusion that goods dis-
tributed under CSR activities are “gifts”. It held,

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