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2020 (1) TMI 1430 - AAR - GSTInput Tax credit - expenses incurred by the Company in order to comply with requirements of Corporate Social Responsibility (CSR) under the Companies Act, 2013 - incurred in the course of business or not - Section 16 of the Central Goods and Services Tax Act, 2017 - restriction on free supply of goods as a part of CSR activities u/s 17 (5) (h) of CGST Act, 2017 - Restriction on goods and services used for construction of school building which is not capitalized, u/s 17 (5) (c) / 17 (5) (d) of CGST Act, 2017. CSR activities - HELD 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”. Free supply of goods as a part of CSR activities - restricted under Section 17 (5) (h) of CGST Act, 2017 or not - HELD THAT:- The section restricted credit of the goods which were written off or disposed off by way of gift or free samples. Now the moot question before us is to decide whether the furniture / fittings such as tables, chairs etc. and electrical goods supplied by the applicant are to be treated as gift or not. The term “Gift' has not been defined under the CGST Act, 2017, however in common parlance gift is provided to someone occasionally, without consideration and which is voluntary in nature - a clear distinction needs to be drawn between goods given as 'gift' and those provided / supplied as a part of CSR activities. While the former is voluntary and occasional, the later is obligatory and regular in nature. CSR expenses incurred by the applicant have been mandated under the Companies Act, 2013. It is the applicant's obligation to incur such expenses in order to be in compliant with the law. Since CSR expenses are not incurred voluntarily, accordingly, they do not qualify as 'gifts' and therefore its credit is not restricted under Section 17(5) of the CGST Act, 2017. Goods and services used for construction of school building which is not capitalized - restriction u/s (5) (c) / 17 (5) (d) of CGST Act, 2017 - HELD THAT:- Section 17 (5) (c) & (d) of the CGST Act, 2017 has specifically restricted the ITC on construction / work contract service to the extent of capitalisation - the ITC of goods and services used for construction of school building will not be available to the applicant to the extent of capitalisation.
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