Mumbai: Gujarat Bench Authority for Advance Rulings (AAR) recently conducted Corporate Social Responsibility (CSR) activities under Companies (CSR Policy) rules are excluded from the ordinary course of business. Its verdict came in a case where the applicant was a private limited company, Adama India. AAR said that Adama India will not be eligible for this input tax credit (ITC) under Goods and Services Tax (GST) Law.
If this decision is followed by the GST authorities during the assessment, it will be a major setback for India Inc, which, in the backdrop of the pandemic, has spent heavily on CSR activities, such as oxygen concentrators and medical treatment through sanitisers. to provide relief Name some examples.
This is another classic case of differing views on the same issue raised by two different benches of AAR. In its edition dated April 8, TOI had covered the decision given by the Uttar Pradesh (UP) Bench in the case of Dwarikesh Sugar Industries. In this case, the AAR Bench had held that CSR is incurred by a company to perform its legal obligations under the Companies Act. Thus, the GST paid by the company on the products purchased by the company for its CSR related expenditure can be set off against its GST liability (this is known as ITC).
In the judgment sought from Gujarat AAR, the applicant-company was a supplier of insecticide, fungicide and herbicide. Its CSR expenditure includes providing notebooks and course material for schools, chairs and tables in schools and hospitals, construction of cement benches in public places, installation of oxygen generating plants in hospitals, masks, sanitizers and oxygen concentrators. was in the direction of.
It was submitted that CSR expenses were mandatory, thus, they were incurred in the course and furtherance of business. Hence, it should be eligible for ITC. However, the Gujarat AAR Bench disagreed with this argument. It went further and pointed out that the decision given by the UP AAR Bench was not binding on him. The AAR rules are binding on the applicant and the concerned GST authorities only.
If this decision is followed by the GST authorities during the assessment, it will be a major setback for India Inc, which, in the backdrop of the pandemic, has spent heavily on CSR activities, such as oxygen concentrators and medical treatment through sanitisers. to provide relief Name some examples.
This is another classic case of differing views on the same issue raised by two different benches of AAR. In its edition dated April 8, TOI had covered the decision given by the Uttar Pradesh (UP) Bench in the case of Dwarikesh Sugar Industries. In this case, the AAR Bench had held that CSR is incurred by a company to perform its legal obligations under the Companies Act. Thus, the GST paid by the company on the products purchased by the company for its CSR related expenditure can be set off against its GST liability (this is known as ITC).
In the judgment sought from Gujarat AAR, the applicant-company was a supplier of insecticide, fungicide and herbicide. Its CSR expenditure includes providing notebooks and course material for schools, chairs and tables in schools and hospitals, construction of cement benches in public places, installation of oxygen generating plants in hospitals, masks, sanitizers and oxygen concentrators. was in the direction of.
It was submitted that CSR expenses were mandatory, thus, they were incurred in the course and furtherance of business. Hence, it should be eligible for ITC. However, the Gujarat AAR Bench disagreed with this argument. It went further and pointed out that the decision given by the UP AAR Bench was not binding on him. The AAR rules are binding on the applicant and the concerned GST authorities only.
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