CSR activities not eligible for GST Input Tax Credit under Section 16(1) - Legal Ruling

The judgment ruled that CSR activities, as per the Companies (CSR Policy) Rules, 2014, are excluded from the normal course of business and therefore not eligible for Input Tax Credit (ITC) under Section 16(1) of the CGST Act. The court emphasized that the cited judicial precedents were not applicable to the GST scheme of law. The ruling clarified that the decision of the Advance Ruling Authority of Uttar Pradesh in a related case did not impact this case's outcome.

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Issues Involved:
1. Whether CSR activities qualify as being in the course and furtherance of business for ITC eligibility under Section 16 of the CGST Act, 2017.
2. Whether specific categories of inputs and input services procured for CSR activities are eligible for ITC under Section 17(5) of the CGST Act, 2017.

Issue-Wise Detailed Analysis:

1. CSR Activities and Course of Furtherance of Business:
The applicant, M/s. Adama India Pvt. Ltd., supplies insecticides, fungicides, and herbicides and undertakes CSR activities as mandated by Section 135 of the Companies Act, 2013. The applicant seeks to know if these CSR activities qualify as being in the course and furtherance of business, making the inputs and input services used in CSR activities eligible for ITC under Sections 16 and 17(5) of the CGST Act, 2017.

The applicant argues that CSR activities, though not directly related to earning immediate profits, are essential for maintaining the company's market standing and avoiding coercive processes. They cite judicial precedents, including the Calcutta HC in Birla Cotton Spinning & Weaving vs. Commissioner of Income-tax and the CESTAT in Essel Propack vs. Commissioner of CGST, Bhiwandi, supporting the view that CSR activities are integral to business operations.

However, the judgment refers to the Companies (CSR Policy) Rules, 2014, and the Companies (CSR Policy) Amendment Rules, 2021, which exclude CSR activities from the normal course of business. Section 16(1) of the CGST Act stipulates that ITC is available for goods or services used in the course or furtherance of business. Since CSR activities are excluded from the normal course of business, they do not qualify for ITC under Section 16(1).

2. Eligibility of Specific Categories of Inputs and Input Services for ITC:
The applicant lists various categories of inputs and input services used in CSR activities, including books and stationery, civil works, plant and machinery, medical equipment, and furniture. They argue that these items should not be considered gifts and should be eligible for ITC.

The judgment notes that the applicant's argument hinges on establishing that CSR activities are in the course and furtherance of business. Since Section 16(1) bars CSR activities from ITC, the judgment does not find merit in discussing the item-wise eligibility of inputs and input services for ITC.

Conclusion:
The judgment concludes that CSR activities, as per the Companies (CSR Policy) Rules, 2014, are excluded from the normal course of business and are therefore not eligible for ITC under Section 16(1) of the CGST Act. The cited judicial precedents pertain to the pre-GST era and do not apply to the GST scheme of law. The Advance Ruling Authority of Uttar Pradesh's decision in Dwarikesh Sugar Industries Ltd. is binding only on the applicant who sought it and does not influence this case.

Ruling:
CSR activities, as per the Companies (CSR Policy) Rules, 2014, are excluded from the normal course of business and are therefore not eligible for ITC under Section 16(1) of the CGST Act.

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