TaxTMI 
TaxTMI 
2021 (9) TMI 1061
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....ss and will therefore be counted as eligible ITC in terms of Sections 16 and 17(5) of the CGST Act, 2017. 3. The applicant submitted as follows: (i) The applicant is eligible to seek Advance Ruling under Section 95(c) of the CGST Act, 2017 and the question on which they are seeking Advance Ruling is covered under Section 97(2)(d) of the Act. (ii) Every registered person under GST can avail the ITC of inputs and input services subject to fulfilment of criteria laid down as per Section 16 of the CGST Act, however, the first and foremost condition for availing the ITC of inputs and input services as per Section 16 of the CGST Act is to ensure that the same is being used in the 'course and furtherance of business. Thus, for any inputs or input services to be come eligible ITC, it is imperative that the same must be used in the course and furtherance of business, although the expression 'course and furtherance of business' has nowhere been defined in the GST law. In other words, inputs and input services pertaining to CSR activities being undertaken by the applicant can become eligible ITC if only it is established that such activities are in the course and furtherance of business. ....
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....s hereunder: "Therefore, sustainability is dependent on CSR without which companies cannot operate smoothly for a long period as they are dependent on various stake holders to conduct business in an economically, socially and environmentally sustainable manner i.e. transparent and ethical. Hence in my considered view, CSR which was a mandatory requirement for the public sector undertakings, has been made obligatory also for the private sector and unless the same is to be treated as input service in respect of activities relating to business, production and sustainability of the company itself would be at stake." (vii) Similar judgement was passed by the Hon'ble Karnataka HC in the matter of Commr. Of CEX, Bangalore, vs. Millipore India pvt.ltd. 2012 [26] STR.514 (Kar.) it was held that the CSR expenses being a statutory obligation are connected with the business since its cost form part of the finished goods being manufactured by a business. The relevant text of the judgement is reproduced as under: "That apart, 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....
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....expense related to CSR activities gets incurred for the purpose of upkeep or running the business and hence ITC pertaining to inputs or input services in such cases doesn't warrant any reversal. 2. All kinds of civil works, whether or not including plant and machinery items Construction of cement bench at public places, public urinals, school auditoriums Section 17(5)(c) of the CGST Act restricts the ITC of works contract service in case where the same is procured for the purpose of construction of immoveable property. However, the definition of 'construction' as per the explanation to section 17(5)(d) of the Act excludes any such construction where the cost incurred by the recipient has not been capitalized in the books. In the given case, since the applicant is treating the civil works as business expenditure and not capitalizing the same, the ITC pertaining to works contract service must be allowed. 3 All plant and machinery items Procurement and installation of oxygen generating plant at hospitals, water filter plants, solar water heaters As per section 17(5)(c) and 17(5)(d) of the CGST Act, 2017, ITC of plant and machinery items is eligible credit and is not blocked or....
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.... matter of Dwarikesh Sugar Industries limited is relying on SC judgement passed in the matter of Ku. Sonia Bhatia v. State of UP, held that 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 latter is obligatory and regular in nature. Thus, supply of furniture items supplied by the applicant cannot be considered as 'gift' and therefore the ITC pertaining to the said item is not barred under section 17(5)(h). (b) The concept of non-availability of ITC of inputs and input services in case of free supplies of goods/services shall not be applicable in the present case since the CSR activities, which involves supply of goods or services without any consideration, are said to be done in course and furtherance of business. Thus, any expense related to CSR activities gets incurred for the purpose of upkeep or running the business and hence ITC pertaining to inputs or input services in such cases doesn't warrant any reversal. 5. The applicant has submitted that it is eligible to avail the ITC of all the above categories of inputs and input services items which are be....
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....ties; that as required by the provisions of the Companies law, the company is spending the mandatory 2% of the Average Net Profits in the CSR activities and the GST suffered on the input/input services items procured is accounted for as CSR related expense; that in cases where GST suffered on inputs and input services items on activities pertaining to CSR is being allowed as eligible input tax credit, the company shall have more funds at it's disposal and will be able to contribute more towards the social cause while meeting the mandatory 2% requirement. Question on which Advance Ruling sought? 7. The applicant has sought Advance Ruling on the following questions: a. Whether the inputs and input services procured by the applicant, in order to undertake the mandatory CSR activities as required under the Companies Act, 2013, qualify as being in the course and furtherance of business and therefore will be counted as eligible ITC in terms of Section 16 of the Central Goods and Services Tax Act, 2017 ('CGST Act')? b. Also, if the answer to the above question is in the affirmative, whether the categories of the following inputs and input services being procured by the applicant for t....
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....ssue hinges on whether CSR activities are in the course or furtherance of applicant's business. 12. We refer to the Companies (CSR Policy) Rules, 2014, made by the Central Government in exercise of its powers under section 469 of the Companies Act. Rule 4(1) of the said Rules reads as follows: "4.(1) The CSR activities shall be undertaken by the company, as per its stated CSR policy, as projects or programs or activities(either new or ongoing), excluding activities undertaken in pursuance of it's normal course of business." Further, vide Companies (CSR policy) Amendment Rules 2021, even the definition of CSR, itself, excluded activities undertaken in pursuance of normal course of business of the company, reproduced as follows, the Rule 2(d) of said Rules, defines CSR as follows: 2(d) "Corporate Social Responsibility (CSR)" means the activities undertaken by a Company in pursuance of its statutory obligation laid down in section 135 of the Act in accordance with the provisions contained in these rules, but shall not include the following, namely:- (i) activities undertaken in pursuance of normal course of business of the company: Provided that any company engaged in researc....