AAR Uttar Pradesh* – GST paid on expenses incurred for CSR are eligible as ITC
Facts |
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Issue before the Authority for Advance Ruling, Uttar Pradesh (‘the AAR’) |
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Discussion and Findings of the AAR |
· The AAR held that expenses incurred by the Applicant to comply with the requirements of CSR under the Companies Act qualify as being incurred in the course of business and thereby eligible as ITC under Section 16 of the CGST Act on account of following key reasons:
Ø Any company which meets the criteria for CSR is mandatorily required to be in compliance with CSR mandate under the Companies Act to avoid business disruptions Ø Relying on the decision of Hon’ble CESTAT Mumbai in the case of Essel Propack Ltd. v. Commissioner of CGST, Bhiwandi [2018 (362) ELT 833] and the Hon’ble High Court of Karnataka in the case of Commissioner of Central Excise, Bangalore v. Millipore India (P.) Ltd., the AAR held that CSR activities shall be treated as incurred ‘in the course of business’ since such activities become an essential part of the business and the Applicant is mandated to undertake such activities to run its business Ø CSR expenses are obligatory and regular in nature as opposed to a ‘gift’ which is voluntary and occasional in nature. On account of an obligation to incur such CSR expenses, the same cannot be considered as ‘gift’ and the ITC of free supply of goods under CSR cannot be restricted under Section 17(5)(h) of the CGST Act Separately, AAR placed reliance on Advance Ruling for the state of Rajasthan in the case of Rambagh Palace Hotels Pvt. Ltd. and held that ITC on goods and services used for construction of school building will not be available to the extent of capitalisation |
*Advance Ruling Order No. 52 dated 22 January 2020 (The Authority for Advance Ruling, Uttar Pradesh)