Can we take GST Input Tax Credit on CSR Expenses??

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The Gujarat bench of the Advance Authority Ruling (AAR) recently held 

That corporate social responsibility (CSR) activities under the Companies ( Policy) Rules are excluded from the normal course of business. The applicant was a private limited company, Adama India. The AAR said Adama India would not be eligible for GST Input Tax Credit under Goods and Services Tax (GST) laws. 


If this ruling is followed by GST authorities during assessments, it will be a big blow to Indian Incorporations which, in the backdrop of the pandemic, has spent heavily on CSR activities, such as providing medical relief by way of oxygen concentrators & sanitizers, to name a few instances. 
This is another classic case of divergent views on the same issue taken by two different benches of the AAR. 


Earlier, the ruling given by the Uttar Pradesh (UP) bench of the AAR in the case of Dwarikesh Sugar Industries. In this case, the AAR bench had held 


That CSR expenditure is incurred by a company to comply with its legal obligations under the Companies Act. Thus, the GST paid by the company on the products it purchased for its CSR-related expenditure could be set off against its GST liability. 


In the ruling sought from the Gujarat AAR bench, 

The Adama India (applicant company) was a supplier insecticides, fungicides and herbicides. 
CSR expenditure of applicant company was towards providing notebooks and course material for schools, providing chairs and tables in schools and hospitals, construction of cement benches at public places, installation of oxygen-generating plants at hospitals, providing masks, sanitizers and oxygen concentrators. 

The applicant company submitted that CSR expenses were mandatory, thus, they were incurred in the course and furtherance of business. Therefore, it should be eligible for ITC. However, the Gujarat AAR bench disagreed with this contention. Gujarat AAR bench went further and pointed out that the ruling given by the UP AAR bench was not binding on it. AAR rulings are binding only on the applicant and the relevant GST officials.

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