Input Tax Credit should be allowed for CSR expenditure incurred by companies

No. PR- 060

June 15, 2021

New Delhi

Input Tax Credit should be allowed for CSR expenditure incurred by companies

The credit of any CSR expenditure incurred by the companies in the course or furtherance of business must be allowed, said Mr. Bimal Jain, Chairman, Indirect Taxes Committee at a Webinar on GST Input Tax Credit – Game Changer Vaccine for Trade and Industry organized by PHD Chamber here today.

There are contrary rulings relating to the allow ability of Input Tax credit on CSR expenditure. Mr. Jain observed that CSR is a legal obligation and companies need to incur this compulsorily for conducting business operations. It is not voluntary in nature so as the credit is denied on same. Therefore, ITC must be made available on CSR activities undertaken by corporates. This will only promote voluntary tax compliance and incentivize CSR activities in larger interest of society and business.

He further added that GST law was introduced on the ITC matching/ mis-matching principle and seamless flow of credit to avoid cascading of taxes. It was projected as a “One Nation One Tax”, but, it is not as smooth as talked about. GST Credit is blocked on certain Inputs and Input Services even though in the course or furtherance of business viz. Contradictory Rule 36(4), 86A, 86B, Credit denied for fault of supplier’s non-payment of taxes, Goods distributed as Sales promotion but denied as being Gift, CSR Expenses, complication of matching ITC with GSTR 2A or 2B, etc. It needs simplification for the Businesses to avail credit with seamless flow so as GST termed as Good and Simple Tax. The Government must try to simplify the process of availing credit for all businesses.

Giving the Welcome Address, Mr. Pradeep Multani, Senior Vice President, PHD Chamber lauded the calibrated reduction in the rates on Remdesivir, ventilators, medical grade oxygen, testing kits, O2 concentrators and BiPAP machines among other covid relief material. He felt that seamless flow of credit, which is the soul of any business, is somewhat missing in GST. Further, the denial of Input Tax credit is causing cascading of taxes. The stringent conditions that need to be fulfilled in order to avail input tax credit are practically difficult to comply with.

Eminent tax experts who deliberated in the different aspects of Input Tax Credit included Mr. Rahul Dhanuka, Partner, Khaitan & Co.; Mr. Deepak Suneja, Managing Partner, NITYA Tax Associates; Mr. Avinash Poddar, Founder Partner, ASHVA Legal Advisors LLP & Mr. Shivam Mehta, Partner, Lakshmikumaran & Sridharan.

The session was followed by active floor participant and attended by more than 800 delegates.


Media Division

PHD Chamber of Commerce and Industry