Can ITC be availed on expenditures incurred on public welfare due to COVID-19?

CA Shubham Kumar | Last updated: 08 June 2020

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Quick Summary

This article examines whether companies can claim Input Tax Credit (ITC) on goods purchased for public welfare initiatives during the COVID-19 pandemic, which are being treated as Corporate Social Responsibility (CSR) expenses. While the Ministry of Corporate Affairs clarified that such spending qualifies for CSR, the availability of GST ITC on these items is debated. The article analyses the definition of 'gift' under GST law and refers to a ruling that denies ITC for CSR activities, treating them as gifts.

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

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FAQ :

The availability of ITC on goods donated for COVID-19 public welfare, treated as CSR expenses, is a point of discussion. While some rulings suggest ITC is not available, the article argues it should be.

The Ministry of Corporate Affairs issued a clarification stating that amounts spent by companies on public welfare due to COVID-19 would be considered under Corporate Social Responsibility (CSR) activities.

Section 17(5)(h) of the CGST Act states that ITC is not available for goods disposed of by way of gift or free samples. This section is being considered in relation to COVID-19 welfare donations.

The GST Act does not define 'gift'. However, the Transfer of Property Act defines a gift as a voluntary transfer of property without consideration. The article discusses whether COVID-19 donations fit this definition.

Yes, ITC should be available if masks and sanitisers are purchased and used for employees during office hours, as these are considered goods used for the furtherance of supply and regular work.