• Notification Date: 09-12-2022
• Notification No: N/A

Companies Profiting in CSR demand withdrawal of GST on Initiatives

The key function of Corporate Social Responsibility (CSR) is helping a business improve its productivity. But companies want the Goods and Services Tax (GST) removed from the legally mandated practice. 

According to a report disclosed on Wednesday, the CSR initiatives that are promoting upskilling and reskilling are gaining momentum. They are translating the labour productivity improvements, and further helping boost economic growth. The "GST Levy on CSR" report released by Teamlease Education Foundation states that the organizations that are creating CSR programs which are meaningful to their employees as well as aligned with the organization’s values, are quite close to achieving business goals. 

The report says that CSR programs are employing new talent along with retaining employees by keeping them engaged and stimulating productivity. The manufacturing, automotive, power and energy, and financial services industries have led to 14 percent raise per annum in the last six years. 55 per cent of all CSR contributions in India came from. The report further added that six Indian states - Andhra Pradesh, Delhi, Gujarat, Karnataka, Maharashtra, and Tamil Nadu contributed t over one-third of total CSR spending in India in FY21. 

Around 97 percent companies believe that GST is demotivating CSR activities. India was the first country in the world to make CSR mandatory in the year 2014, under the Companies Act, 2013. As per the law, all companies must spend at least two percent of their average net profits made during the three immediately preceding financial years on CSR. 

According to the law, it is not mandatory paying a direct GST on the 2 per cent CSR amount. But it must be paid on the goods and services bought or sold for various CSR activities. The payment might be for procuring cement, bricks and other materials for building schools or hospitals and other similar CSR activities. Input tax credit cannot be availed on such goods or services. 

Ramani Dathi, Director of TeamLease Education said "a majority of India Inc feels that CSR activities should be predominately viewed with philanthropic spirit but the unequal levy of GST certainly makes it unjustified. 88 per cent of all firms surveyed are both aware of and opposed to the tax. Only 3 per cent of people are aware of and in favour of the GST levied on CSR initiatives.”