In re Dwarikesh Sugar Industries Limited (GST AAR Uttar Pradesh)
Question 1:- Whether expenses incurred by the Company in order to comply with requirements of Corporate Social Responsibility (CSR) under the Companies Act, 2013 (`CSR Expenses’) qualify as being incurred in the course of business and eligible for input tax credit (`ITC’) in terms of the Section 16 of the Central Goods and Services Tax Act, 2017 (`CGST Act, 2017′)?
Answer:- Applicant is compulsorily required to undertake CSR activities in order to run its business and accordingly, it becomes an essential part of his business process as a whole. Therefore the said CSR activities are to be treated as incurred “in the course of business”.
Question 2:- Whether free supply of goods as a part of CSR activities is restricted under Section 17 (5) (h) of CGST Act, 2017?
Answer:- 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 later is obligatory and regular in nature. CSR expenses incurred by the applicant have been mandated under the Companies Act, 2013. It is the applicant’s obligation to incur such expenses in order to be in compliant with the law. Since CSR expenses are not incurred voluntarily, accordingly, we are of the opinion that they do not qualify as ‘gifts’ and therefore its credit is not restricted under Section 17(5) of the CGST Act, 2017.
Question 3:- Whether goods and services used for construction of school building which is not capitalized in the books of accounts is restricted under Section 17 (5) (c) / 17 (5) (d) of CGST Act, 2017 ?
Answer:- Section 17 (5) (c) & (d) of the CGST Act, 2017 has specifically restricted the ITC on construction /work contract service to the extent of capitalisation. Accordingly, we observe that the ITC of goods and services used for construction of school building will not be available to the applicant to the extent of capitalisation.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, UTTAR PRADESH
Sub:- GST ACT, 2017 – Advance Ruling U/s 98 – liability to tax under GST Act in respect to application dated 24.09.2019 of M/s Dwarikesh Sugar Industries Limited, P.O.- Medpurasultan, Najibabad, Nagina Road, Bundki, Bijnor, Uttar Pradesh – Order- Reg.
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1) M/s Dwarikesh Sugar Industries Limited, P.O.- Medpurasultan, Najibabad, Nagina Road, Bundki, Bijnor, Uttar Pradesh- 246 762 (here in after called the applicant) is a registered assessee under GST having GSTIN: 09AABCD8192N1ZO.
2) The applicant is a company incorporated under the Companies Act, 2013 and engaged in the business of manufacture and sale of sugar and allied products. In order to comply with the Corporate Social Responsibility (CSR) in terms of Section 135 of the Companies Act, the applicant undertakes following activities:
