CSR spending outside business use blocks input tax credit under the CGST Act, the AAR held.

Mandatory corporate social responsibility expenditure was treated as a statutory obligation outside the normal course or furtherance of business, so inputs and input services used for such activities did not meet the condition in section 16(1) of the CGST Act for input tax credit. The CSR Rules and the CSR definition were relied on to show that CSR activity is distinct from ordinary business operations. On that basis, credit on goods and services procured for CSR purposes was held inadmissible.

---

---

Issues: Whether inputs and input services procured for mandatory corporate social responsibility activities are used in the course or furtherance of business and therefore qualify for input tax credit under the Central Goods and Services Tax Act, 2017.

Analysis: The eligibility of input tax credit depends on use of the goods or services in the course or furtherance of business under section 16(1) of the Central Goods and Services Tax Act, 2017. The Companies (CSR Policy) Rules, 2014, as well as the amendment defining CSR, exclude activities undertaken in pursuance of the normal course of business. On that basis, corporate social responsibility activities were held to be statutory obligations distinct from the applicant's normal business operations. Since the activities were excluded from the normal course of business, the associated inputs and input services did not satisfy the statutory condition for credit.

Conclusion: The claim for input tax credit on goods and services procured for corporate social responsibility activities was held to be inadmissible.

Final Conclusion: Mandatory corporate social responsibility spending was treated as outside the scope of business use for input tax credit purposes, so the related credit was disallowed.

Ratio Decidendi: Input tax credit under section 16(1) is available only for supplies used in the course or furtherance of business, and statutory CSR expenditure excluded from the normal course of business does not satisfy that requirement.

---