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INPUT TAX CREDIT ON EXPENDITURE UNDER CORPORATE SOCIAL RESPONSIBILITY SCHEME

Corporate Laws / Banking / SEBI - By: - Mr. M. GOVINDARAJAN - Dated:- 13-9-2018 Last Replied Date:- 15-9-2018 - Introduction In all over the world the theme corporate social responsibility ( CSR for short) is prevailing among the corporate sector. It is a voluntary one. Even in the earlier periods in India it was made as voluntary only. After the enactment of Companies Act, 2013 this scheme has been made as mandatorily. India is the first country to make the CSR as mandatory. Definition Rule 2(1 .....

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at least 2% of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy. The company can spend more than 2% of the average net profits of the company. The company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities. CSR activities Schedule VII to the Act provides the list of activities th .....

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ining quality of soil, air and water 4[including contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga; protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts; measures for the benefit of armed forces veterans, war widows and their dependents; training to promote rural sports, n .....

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t the surplus arising out of the CSR projects or programs or activities shall not form part of the business profit of a company. The same shall be adjusted against the CSR expenses incurred by the business and the net amount should be calculated which will in turn be treated non-cost and form part of the reconciliation statement. Issue The issue to be discussed in this article is whether input tax credit under GST can be availed and utilized on the taxes paid for the purposes of corporate social .....

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7 of the Union Territory Goods and Services Tax Act, (reverse charge) but does not include the tax paid under the composition levy. The expression input tax credit is defined under section 2(63) of the CGST Act as the credit of input tax. Availing of input tax credit The input tax credit includes the tax paid on input as well as input services. The term input is defined under section 2(59) of the CGST Act as any goods other than capital goods used or intended to be used by a supplier in the cour .....

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TMI 247 - CESTAT, Mumbai, Audit was conducted in the factory and it was detected that between the period October 2009 and November 2010 CENVAT credit of service tax amounting to ₹ 12,12,772/- was availed towards such company s commitment to CSR and audit pointed out the same to be inadmissible. The view of the Department is that such input service did not fall under the definition of input services given in Rule 2(l) of CENVAT Credit Rules 2004 for manufacture of appellant s final product .....

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e welfare activities and not related to business/ production related activities; the service of imparting training have been provided by the trust M/s. Shree Kalamadevi Charitable Trust to the students of the weaker section of society and not by the appellant company itself and therefore there was no service provided by the Trust against which CENVAT credit is claimed by the appellant; Section 135 of the Companies Act effective from 01.04.2014 on mandatory CSR activities to be discharged by the .....

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e definition of input service . The Department may or may not file appeal against this order. This case law may be relied on in the present situation if input tax credit on the expenditure of CSR is denied. It may be insisted that the logic observed by the Tribunal may also be applicable to the present case. It may be argued that the compliance of the provisions relating to CSR is in furtherance of business. In the view of the author the decision of the Tribunal will not hold good for the presen .....

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ce there is a restriction on allowing the CSR expenses as business expenses, the input tax credit cannot be availed unless otherwise there is a clear provision in the Act or in the Rules. whereas there are expenses which are legitimate expenses under the income tax, however, the ITC of it have been denied under section 17(5). the legal ratio came is can ITC be denied merely on the basis of expenses, not allowed under income tax act, please help - Reply By JSW CEMENTLIMITED - The Reply = We shoul .....

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