ITC credit eligibility of contribution to govt

ITC can be claimed fully provided it helps your business activity.

No ITC Cannot be claimed if the CCTV is given as a contribution / donation / free supply. ITC is allowed only when goods/services are used in the course or furtherance of business

Section 16(1) of the CGST Act is very clear.

A contribution to the Police Department is:

• CSR / goodwill / public safety contribution

• Not linked to outward taxable supply

• Not used to earn taxable revenue

 Hence, fails the “furtherance of business” test.

ITC is Allowed if used for business purposes

Under Section 16 of the CGST Act, 2017, ITC is available when goods/services are used in the course or furtherance of business.

ITC requires:

·       Supply of goods/services

·       GST invoice

·       Used for business purpose

Donation or contribution:

·       Not a supply

·       No GST charged

·       Not in course of business

Therefore: No ITC

If Police Department:

·       Charged GST

·       Issued tax invoice

·       Provided specific taxable service (like security service)

Then ITC may be allowed.