Cos may claim input tax credit for PPE

Officials in Central Board of Indirect Taxes and Customs (CBIC) have said that government may allow companies to claim input tax credit for personal protective equipment (PPE) kits, sanitisers, masks & other such goods distributed free for battling Covid-19. According to sources aware of the development, 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.

One respite measure 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. This also incurs services being offered free of charge, for instance, providing free lodging for Covid frontline workers in hotels.

“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. If the proposal materializes, it would be in tandem with global principles, he added.