One of the officials said the government had received several representations seeking relaxation in Sec 17(5)(h) of CGST Act 2017, which does not permit credit on goods given for free or as a gift, or lost, stolen, destroyed or written off.
The government could allow companies to claim input tax credit for personal protective equipment (PPE) kits, sanitisers, masks and other such goods distributed free for battling Covid-19. Officials in Central Board of Indirect Taxes and Customs (CBIC) aware of the development said the issue was being examined and a decision is expected shortly.
One of the officials quoted above said the government had received several representations seeking relaxation in Sec 17(5)(h) of CGST Act 2017, ..
One of the ways being considered is to allow the relaxation through corporate social responsibility (CSR) rules, which have already allowed for companies’ spend on Covid-related activities to be counted as CSR expenditure, including services being offered free of charge, for instance providing free lodging for Covid frontline workers in hotels.
“If services are given by the company as part of CSR then there is no need of such reversal of input tax credit… If such restriction is not there for services, then for goods also such restriction could be considered for removal,” a second official said, asking not to be named.
Experts said that clarity from the government would go a long way in giving corporates room to do more on the CSR front. “There’s always been a debate whether CSR spend like this would be eligible for input credit and whether it is for 'business purposes' but if it is clarified, it would encourage businesses to take these initiatives,” said Pratik Jain, partner at PwC India. He added the move would also align India’s provisions with global principles.
“In today’s environment, purchase of sanitisers, masks or gloves would be an essential business expense and hence, irrespective of whether they are being used for personal well being of employees, input GST should be available to all companies,” said Harpreet Singh, partnerindirect tax at KPMG India.