Corporate law changes: small steps towards procedural simplification
– Anushka Vohra, Manager | corplaw@vinodkothari.com
The Budget 2023, proposes certain amendments, partly towards ease of doing business, and partly for certain rationalization measures.
The major amendments proposed are as follows:
- CSR expense not to result into GST set off
We had in our previous article, dealt with the question whether,GST paid, while acquiring goods or services for CSR activities would give rise to an input tax credit. Section 17(5)(h) of the CGST Act excludes “goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples” for the purpose of availing ITC on payment of GST. The term ‘gift’ is not defined anywhere in the CGST Act. However, in layman’s language, gift means a thing given willingly to someone without payment.
While, there isn’t any explicit clarification to say whether input tax credit will be available or not, we relied on certain judicial pronouncements, some of which confirmed the availability of ITC benefit, and some denied it.
The Budget 2023, proposes that section 17(5) of the CGST Act shall be amended to the effect that input tax credit shall not be available in respect of goods or services or both received by a taxable person, which are used or intended to be used for activities relating to his obligations under corporate social responsibility referred to in section 135 of the Companies Act, 2013.
Hence, in case of the company being subjected to the obligation of spending on CSR, the GST benefit will be denied to the company. The expression is clearly related to the obligation under CSR in terms of sec. 135 – therefore, this denial of ITC benefit will be applicable only in case of the company.
The effective date of the amendment will be 1st April, 2023. Hence, once the Budget proposals are passed, any acquisition of goods or services for CSR purposes will be denied the benefit of GST set off.
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