The Indian government is looking into a request to allow companies to receive input tax credits for pandemic-related items such as personal protective equipment (PPE), sanitizers, and other similar goods, said The Economic Times. The pertinent government body is expected to give a decision soon.

According to the report, officials received petitions for the relaxation of Section 17 (5)(h) of the Central Goods and Services Tax (CGST) Act 2017. This provision prohibits the granting of tax credits on items that were given for free. This includes gifts, and lost, stolen, destroyed or written off goods.

The virus pandemic relief has been assisted greatly by the private sector through donations of PPEs and relief goods. On this note, the Central Board of Indirect Taxes and Customs (CBIC) is examining the possibility of relaxing the stipulation through corporate social responsibility (CSR) rules.

Input Tax Credit For PPEs

Existing CSR rules state that companies can count funds for pandemic-related activities as CSR expenditure. Such activities can include services offered without charge like free hotel accommodations for front liners.

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Regarding this, an unnamed government official said, “If services are given by the company as part of CSR then there is no need for such reversal of input tax credit.” He added that if such restriction does not apply to services, then it should be considered for a removal for items.

Pratik Jain, a PwC India partner, said that there is an on-going debate regarding the application of the CGST Act and CSR rules. He is optimistic that a decision from the government would make more room for the private sector to funnel more funds as part of their CSR.

KPMG partner Harpreet Singh also noted that input tax credits should be available on pandemic-related goods as these are considered essential business expenses.

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