Cenvat credit of Service Tax on CSR Activities

[Asked by Guest]

Sir,

We are laying Cement Roads in nearby villages as apart of CSR activity and paying Service Tax to the contractor. Since it falls under Civil works we are not availing Cenvat credit of Service Tax paid.

Whether we can take credit irrespective of nature of work since its on account of CSR Activity or not to avail credit.

Can we categorise the expenditure as the expenditure incurred towards CSR activity and not expenditure towards laying of CC roads and avail credit.

[Himansu Sekhar]

No, since the activites are mostly welfare activities and not relating to business of manufacture. Further works contracts for civil construction are excluded.

[Nash Industries I Pvt Ltd]

CSR and Cenvat Credit Rules are two different aspects.

Eligibility of Credit is determined under CCR.

Agree with Mr Himanshu.

Regards

S.Ramaswamy

[KASTURI SETHI]

I support the views of both Experts.

[KASTURI SETHI]

Welcome to Sh.S.Ramaswamy Sir in this forum. We are relishing his knowledge. No chinks in his knowledge.Fantastic.

[Nash Industries I Pvt Ltd]

thank you sir.

Regards

S.Ramaswamy

[YAGAY and SUN]

Well, whether a different view is not be adopted since CSR activities are statutory obligation under Section 135 of the Company Act. If this statutory obligation is not fulfilled that whether there can be any impact on company's manufacturing activities. Also there is a need to develop a totally new contention to prove a nexus between CSR Activities and manufacturing business of a company to convince the Department to allow the CENVAT credit on CSR Activities.

Experts can have discussions further on this point as brain storming will be beneficial to trade in this matter.

Thank u all.

Sir, I am of the view that whether the credit of Service Tax is availed or not, there would be no financial impact.

I would also like to justify my view,

If no credit is taken in respect of Service Tax then it would be a cost to CSR activity thereby the CSR obligation gets reduced.

If credit is availed in respect of Service tax it would be credited to Cenvat credit receivable a/c and thereby the CSR obligation does not get reduced.

In both the cases there will be Cash outflow.

Please correct me if I am wrong.

[DR.MARIAPPAN GOVINDARAJAN]

Service tax credit on CSR activities does not arise as held by experts. But the service tax paid along with the cost of CSR would form part of the total cost is doubtful. Views of experts are solicited.

AI Summary

Cenvat credit on CSR-funded civil works is not available absent a nexus to the taxpayer's business or manufacturing.
Eligibility of Cenvat credit for Service Tax on CSR civil works like laying roads is not established because such welfare or statutory CSR activities lack the requisite nexus to the assessee's business of manufacture; works contracts for civil construction are excluded. The statutory CSR obligation does not change Cenvat eligibility. Service Tax paid either forms part of CSR cost when credit is not taken or becomes a Cenvat receivable if credit is taken, but taking credit does not reduce the CSR obligation.