Companies claim that GST is reducing CSR funds

Updated: Sep 12th, 2024


Companies have claimed that the Goods and Services Tax (GST) is eating into their Corporate Social Responsibility (CSR).

The issue primarily affects companies with annual profits exceeding ₹500 crore, which are mandated to allocate 2% of their profits to CSR activities. The GST imposed on CSR-related expenditures, which can amount to 18% to 20% of the total funds, is a significant burden on these initiatives, according to the companies.

Notably, the companies are required to pay GST on contracts for CSR activities. Under the new rules which took effect on October 1, 2023, companies are not allowed to claim input tax credit on GST paid for CSR-related work. 

As a result, companies claim that  12%-28% of their CSR funds are getting absorbed by the GST charges. This reduction has led to frustration among businesses, who argue that CSR funds should be exempt from GST to ensure more money is available for social services.

Industry leaders argue that this taxation reduces the effectiveness of CSR programs by diverting crucial funds away from social and community-focused projects. 

Also read :

Gujarat in support to drop GST on health insurance


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