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

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

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.

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.