Telangana AAR Allows CSR Expenses to be Claimed As GST ITC

The Authority for Advance Rulings, Telangana (AAR) held that Input Tax Credit (ITC) could get claimed on Corporate Social Responsibility (CSR) Expenses for the case of M/s Bambino Pasta Food Industries Private Limited which is the petitioner.

Petitioner seeks an advanced ruling if the GST ITC would be available on the expenditure of CSR that the company spent. The petitioner would be the private limited company who has been involved in the manufacturing of Vermicelli and pasta Products.

The petitioner’s counsel stated CSR expenses would not be made voluntarily therefore the petitioner mentioned, the same would not be entitled to be the gift and thus the same credit would not get limited under Section 17(5) of the CGST Act, 2017 and non-spending of the CSR funds would secure the impact on the operations of the company since the penal provisions under the companies act 2013 would secure the fiscal impact along with that how the customers think about the brand.

The petitioner mentioned that the company made CSR expenditures beneath the law which is made due to business operations via no imagination stretch, it can be recognized as a gift for any cause.

The Two Member Bench of the Authority comprises of S.V. Kasi Visweswara Rao, Additional Commissioner (State Tax) Sahil Inamdar, Additional Commissioner (Central Tax) sees that “Under the Companies Act, 2013, the Companies with a specified net worth or net profit are obliged to incur a minimum of 2 % of their net profit towards their corporate social responsibility (CSR) and failure to do so will attract penalty under subsection 7 of Section 135 of the Companies Act, 2013 which may go up to a maximum of Rs.1 Cr.”

“Thus, the running of the business of a company will be substantially impaired if they do not incur the said expenditure. Therefore, the expenditure made towards corporate responsibility under section 135 of the Companies Act, 2013, is an expenditure made in the furtherance of the business.”