When we are writing this article, the world is suffering a ridiculously huge dilemma due to COVID-19 pandemic. Many persons are donating mask, sanitizers, personal protective equipment (PPE), ventilators etc. to the needy people. It is an exceptionally good help to the needy people by giving some essential and required things in this situation.

To encourage these donations the Ministry of Corporate affairs issued a clarification that amount spent by companies would be consider under Corporate Social Responsibility (CSR) activities.

Now the question arises that those persons are donating these items to needy people under obligation of Corporate Social Responsibility, are paying GST at the time of purchase these goods, can be eligible for ITC.

Our Analysis

  • If money donated – In this case, No GST element then no question arises for Input tax Credit.
  • If masks, sanitizers, PPEs, Ventilators etc. donated as Corporate Social Responsibility expenses:
    • Per section 17(5)(h) of CGST Act, 2017, Input tax credit shall not be available in respect of the goods lost, stolen, destroyed, written off or disposed off by way of gift or free samples.

These transactions are not covered under goods lost, stolen, destroyed, written off but many peoples have doubt that whether this transaction will cover under gift?

Let us analyze what is the meaning of GIFT.

Gift is not defined under the GST Act. However, Transfer of property act defines, “Gift” is the transfer of certain existing moveable or immoveable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee.

As per above definition if any goods transfer voluntarily and without consideration would be treated as gift. Though, in such case, goods are transferred without consideration but not voluntarily. It is required under the law, then it should not be covered under the “GIFT.”

In matter of Polycab wires Pvt. Limited, AAR Kerala decided that ITC is not available on any goods used for CSR activities and would be treated as Gift and section 17(5)(h) would be applicable in such case.

As per above ruling, ITC would not be available on CSR activities but as per our understanding ITC should be available in such transaction.

♠ If masks, sanitizers purchased and used for employees during office hours. –

As per GST Act, if any goods use for furtherance of supply then ITC would be available. In such case these items use for regular work and as per direction issued by MHA. Then ITC should be available in such case.

Conclusion: As per the above discussion, GST should be available on above transactions but required some positive clarification on availability of ITC in such situation.

CA Shubham Goyal | [email protected] | GST Salahkar

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April 2021