ITC not allowed on tax paid on goods or services procured for CSR activities: AAR

Case Details: Authority for Advance Rulings, Gujarat Adama India (P.) Ltd. In re - [2021] 132 taxmann.com 45 (AAR - GUJARAT)

Judiciary and Counsel Details

• • Sanjay Saxena and Arun Richard, Member
  • Gorki Tiwari, Sr. Manager and Ramakrishna Hari, GM, Finance for the Applicant.

Facts of the Case

The applicant was engaged in supply of insecticides, fungicides and herbicides. It was 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. It filed an application for advance ruling to determine whether CSR activities to be considered as in course of furtherance of business and would be eligible for ITC.

AAR Held

The Authority for Advance Ruling observed that as per the Companies Act, CSR activities are not activities undertaken in pursuance of applicant’s normal course of business. Moreover, as per Section 16(1) of CGST Act, 2017, a registered person is entitled to take credit of input tax charged on any supply of goods or services or both, which are used or intended to be used in the course or furtherance of his business. Therefore, it was held that the section 16(1) of the CGST Act bars CSR activities from input/input service and thus not eligible for ITC.

Case Review

• • Essel Propack Ltd. v. Commissioner of CGST 2018 (362) ELT 833 (Tri. – Mum.)
  • CCE v. Millipore India (P.) Ltd. [2011] 16 taxmann.com 363/[2012] 34 STT 86 (Kar.) (para 16) distinguished.

List of Cases Referred to

• • Birla Cotton Spg. & Wvg. Mills Ltd. v. CIT [1967] 64 ITR 568 (Cal.) (para 3)
  • Essel Propack Ltd. v. Commissioner of CGST 2018 (362) ELT 833 (Tri. – Mum.) (para 3)
  • CCE v. Millipore India (P.) Ltd. [2011] 16 taxmann.com 363/[2012] 34 STT 86 (Kar.) (para 3)
  • Dwarikesh Sugar Industries Ltd., In re [2021] 125 taxmann.com 329 (AAR – UP.) (para 4)
  • Ku. Sonia Bhatia v. State of UP AIR 1981 SC 1274 (para 4).