TaxTMI 
TaxTMI 
2020 (1) TMI 1430
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....mpanies Act, the applicant undertakes following activities: • Construction of school building, additional rooms, laboratories, etc.; • Free supply of furniture / fittings such as tables, chairs etc., to be used in the school; • Free supply of electrical goods for use in school; and • Other expenses such as provision of goods / services to Registered Charitable Trusts / NGO's In order to undertake the above-mentioned CSR activities, the applicant procures various goods and services on which GST is charged by the supplier. 3). Accordingly, following questions have been posted by the applicant, in his application dated 24.09.2019 (application completed in all aspect received by the Authority on 25.10.2019), before the Authority: i. Whether expenses incurred by the Company in order to comply with requirements of Corporate Social Responsibility (CSR) under the Companies Act, 2013 ('CSR Expenses') qualify as being incurred in the course of business and eligible for input tax credit ('ITC') in terms of the Section 16 of the Central Goods and Services Tax Act, 2017 ('CGST Act, 2017')? ii....
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....SR credit is not restricted under Section 17 (5) of CGST Act, 2017, the same is eligible for ITC. 5). The application for advance ruling was forwarded to the Jurisdictional GST Officer to offer his comments/ views/ verification report in the matter, which was received in this office vide letter C. No. V(30)Div-Bij/Misc./60/18-19/10 dated 02.01.2020, wherein it has been reported that on the basis of restrictive provisions under Section 17(5)(c & d), ITC in respect of inward supplies of goods & Services for construction of school building, furniture and electrical fittings for school building, is not available to the applicant irrespective of activities being carried out for corporate social responsibilities. 6). The applicant was granted a personal hearing on 21.01.2020. Shri Manoj Agarwal, Chief Manager (Taxation) and Sh. K. Sivarajan, Chartered Accountant, Authorized representatives of the applicant, appeared for hearing on the given date. During the personal hearing, they reiterated the submissions already made vide their advance ruling application dated 24th September and submitted details of some case laws in the matter. DISCUSSION AND FINDING 7). At the outset, ....
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....nefits to its members; (f) admission, for a consideration, of persons to any premises; (g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation; (h) services provided by a race club by way of totalisator or a licence to book maker in such club ; and (i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities". 10). As per Section 135 (1) of Companies Act, 2013, "Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during the immediately preceding financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director." And as per Sub Section (5) of the Section 135 of the Companies Act, 2013, "The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, a....
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....o business, production and sustainability of the company itself would be at stake." 12). Further, Hon'ble High Court of Karnataka, in its judgment, in the case of M/s. Commissioner of Central Excise, Bangalore Vs. Millipore India (P) Ltd., has observed that, "....now the concept of corporate social responsibility is also relevant. It is to discharge a statutory obligation, when the employer spends money to maintain their factory premises in an eco-friendly, manner, certainly, the tax paid on such services would form part of the costs of the final products, Tribunal was right in holding that the service tax paid in all these cases would fall within the input services and the assessee is entitled to the benefit thereof.." In view of this, we observe that the applicant is compulsorily required to undertake CSR activities in order to run its business and accordingly, it becomes an essential part of his business process as a whole. Therefore the said CSR activities are to be treated as incurred "in the course of business". 13). As regard to the question whether free supply of goods as a part of CSR activities is restricted under Section 17 (5) (h) of CGST Act, 2017, we obse....
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....CSR expenses are not incurred voluntarily, accordingly, we are of the opinion that they do not qualify as 'gifts' and therefore its credit is not restricted under Section 17(5) of the CGST Act, 2017. 14). As regard to the second question of the applicant that whether goods and services used for construction of school building which is not capitalized in the books of accounts is restricted under Section 17 (5) (c) / 17 (5) (d) of CGST Act, 2017, we observe that Section 17 (5) ( c) and 17 (5) (d) of CGST Act, 2017 has restricted the credit on construction/ Work Contract services, which is as under:- (c) works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. Explanation.-For the purposes of clauses (c) and (d), the expression "construction" includes re-construction,....