UP AAR: Expenses for CSR Work Are Not Eligible for GST Input Tax Credit

Uttar Pradesh-based authority for advance ruling (AAR) has held that on the GST, the Input tax credit (ITC) could not be claimed that has been paid on the expenses towards the corporate social responsibility (CSR).

For the case, the ruling was provided to the company that used to manufacture and supply the parts of the automobile like pistons, piston rings, and engine valves.

The company that seeks the AAR that if the same would be qualified to claim the Input Tax Credit (ITC) for the GST filed on different services and the expenses made for releasing its CSR responsibilities.

It added that such CSR activities would rectify the image of the company in public and increase its brand value and make it different from its competitors.

According to the company, because these activities encourage business, it engages numerous vendors or suppliers to carry out operations related to education, sanitation, healthcare, and the environment.

The applicant pays the suppliers the consideration plus any applicable GST for such a supply of goods and services.

It must qualify to claim ITC as expenses on the activities of CSR would be made for its business the company contended.

Read also: List of Goods and Services Not Eligible for Input Tax Credit

AAR, that CSR activities, as per the Companies (CSR Policy) Rules, 2014 are not included in the normal course of business of the petitioner and hence would not get qualified for ITC.

A tax expert mentioned that pursuant to the particular restrictions on claiming the credit beneath the CGST act and the fact that both beneath the CSR regulations and income tax act, Because CSR activities are considered non-business expenses, claiming input GST credit on CSR expenditures has been difficult.

“This is true, even though some rulings under GST and under erstwhile Service tax have given an affirmative answer on the availability of credit and thus, tend to give hope to taxpayers,” the tax expert mentioned.