GST: CSR Activities excluded from Normal Course of Business and not eligible for ITC, rules AAR [Read Order]

The Gujarat Authority of Advance Ruling (AAR) held that Corporate Social Responsibility (CSR)  activities were excluded from the normal course of business and not eligible for Input Tax Credit (ITC).

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 on the issue of whether CSR activities are in the course or furtherance of business and will therefore be counted as eligible ITC in terms of Sections 16 and 17(5) of the CGST Act, 2017.

The Coram of Arun Saxena and Arun Richard ruled that Section 16(1) of the CGST Act, stipulates that 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. Thereby, the AAR held that Section 16(1) of the CGST Act bars CSR activities from input or input service.

“CSR activities, as per Companies (CSR Policy) Rules, 2014 are those activities excluded from the normal course of business of the applicant and therefore not eligible for ITC, as per Section 16(1) of the CGST Act,” the AAR said.

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