Case Law Details
Recently in a advance ruling by Kerala authority for advance ruling , it has been held that applicant cannot take input tax credit for expense incurred in connection with corporate social responsibility expenses.
Summary of Ruling is as:
The applicant Polycab Wires Private Limited., is a dealer of electrical goods and cables. The applicant is under advance ruling for two issues.
1. Applicant supplied electrical items to Kerala state electricity board (board) through their distributors in connection with reinstating connectivity in the flood ridden areas as part of CSR activity. Distributors of applicant raised invoice on Board and charged GST. 100% discount is provided to board. However the GST liability was paid to the Government. Further distributors claimed complete amount from applicant. The applicant claimed that Since GST liability is paid, distributors are are entitled to claim input tax credit against same. The AAR allowed input credit as GST is paid on free supplies.
2. In addition to above, The applicant also distributed electrical items like, switches, fan, cables etc. to flood affected people under CSR expenses on free basis without collecting any money. As per section 17(5)(h), input tax credit shall not be available in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. Thus, in relation to this, the applicant was denied input tax credit on such free goods distributed as per section 17(5) of CGST and KSGST by Kerala AAR.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
Dear CA Namish
This is really a very good articulated article. Hope to see few more like this in near future.
Thanks