ITC of CSR Expenses

[Prem Choudhary]

Dear Expert

Please advice, whether CSR Expenses are eligible for credit under GST.

we are aware that this is not furtherance of business expenses but it is provided in other Laws.

[KASTURI SETHI]

Dear Querist,

On what basis you can jump to conclusion that CSR is not in furtherance of business ? What is logic behind your view ? CSR (Corporate Social Responsibility) expenses are covered under Section 2 (17) (b) of CGST Act, 2017 which extracted below :-

Section 2 (17) “business” includes -

(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;

(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);

Relevant clauses have been highlighted. CSR expenses are eligible for ITC under GST.

. On 5.9.18, Mumbai Bench of CESTAT has held that CSR activities are linked to business and eligible for cenvat credit as input service. Although the above decision of CESTAT Mumbai pertains to the pre-GST period yet it is applicable to post-GST regime.

However, there is another case law which is appended below:

2018 (362) E.L.T. 833 (Tri. - Mumbai) = 2018 (9) TMI 247 - CESTAT MUMBAI ESSEL PROPACK LTD. Versus COMMISSIONER OF CGST, BHIWANDI

In view of the above two case laws (though pertaining to pre-GST era), I am of the view that CSR expenses are eligible for ITC under the present GST regime.

 

[CSSANJAY MALHOTRA]

Am in agreement with Sh. Kasturi ji that ITC is available on CSR activities. Govt clarified vide FAQ also.

Please do note that if you avail iTC then you have to incur additional expense on CSR. Hence advisable not to avail ITC to save on additional outflow. Check from Income Tax side, May be these expenses are disallowed.

[Prem Choudhary]

Dear Sanjay ji

Thank you for your valuable advice, can you share the FAQ ...

AI Summary

Input tax credit on CSR expenses: GST definition and precedent support eligibility, but check cash flow and income tax effects. CSR expenses may qualify for input tax credit under GST because the CGST Act's definition of business covers activities incidental or ancillary to trade, and a pre GST Mumbai CESTAT decision allowed cenvat credit on CSR services. A government FAQ is cited as confirming ITC availability. Advisers caution that claiming ITC can necessitate higher CSR outlays to offset benefits and may trigger unfavorable income tax treatment, so taxpayers should assess cash flow and income tax implications before claiming credit.