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1. Brief facts of the case • M/s Adama India Pvt. Ltd. (The Applicant), engaged in a business where it supplies insecticides, fungicides and herbicides. • As per mandatory requirement under Companies Act, the applicant participates in the Corporate Social Responsibilities (CSR) Activities. For this purpose, the applicant spends mandatory amount on various CSR Activities such as civil works or installation of Plant & Machinery, distribution of foods in school/hospitals, etc. • The vendors of products and services used in CSR Activities charge the GST on these goods or services. • The applicant is intending to avail the Input Tax Credit on goods or services used in CSR Activities.
Relevant Legal Extracts • Section 2(17)-“Business” • Word “Business” is defined under Section 2(17) of the CGST Act, which is reiterated below: • ““Business” includes: • (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; • (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); • (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;” • Section 16: Eligibility and conditions for taking input tax credit • “(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.” • Section 17: Apportionment of credit and blocked credits • “(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:— • …. • (h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and”
3. Submission of the Appellant • The applicant submitted that ITC can be availed by a person registered subject to fulfilment of criteria mentioned in section 16 of the CGST Act. • Among other things, as per Section 16, the main criterion to avail ITC on input and input service is that the same must have been used for “course and furtherance of business”. Although, the phrase “Course and Furtherance of Business” is not defined anywhere in GST law. • Therefore, the applicant shall be entitled to claim ITC on CSR Activities only if such activity can be considered as incurred in course and furtherance of business. • The appellant further submitted that as per definition of “business”, any activity done in connection with the main business operation of the company shall be considered as “Business”. • In the given case, CSR Activities are a mandatory obligation of the applicant as per Companies act and not performing the same may lead to portray a bad image of the company.
