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Published on:
March 21, 2023
By
Harshini

Time of supply of services – Section 13 of CGST ACT 2017

Section 13 of the CGST Act 2017 deals with the time of supply of services. The time of supply is the point in time when a transaction of supply of goods or services is deemed to have occurred for the purpose of determining the tax liability.

The time of supply of services is generally determined based on the following events:

Date of issue of invoice: If the invoice is issued within the prescribed time limit, the time of supply is the date of issue of the invoice or the date of receipt of payment, whichever is earlier.

Date of receipt of payment: If the invoice is not issued within the prescribed time limit, or if the payment is received before the issue of invoice, the time of supply is the date of receipt of payment.

Completion of service: If the service is completed before the issuance of the invoice or receipt of payment, the time of supply is the date of completion of the service.

Date of receipt of advance: If an advance payment is received before the provision of service, the time of supply is the date of receipt of advance payment.

Provisional supply: If the service is provisionally supplied, the time of supply is the date of completion of the provisionally supplied service.

It's important to note that the time of supply of services may differ in certain cases, such as continuous supply of services, reverse charge mechanism, and services provided by a banking company or a financial institution.

In conclusion, the time of supply of services is an important aspect in determining the tax liability under GST. Businesses must comply with the provisions of Section 13 of the CGST Act to correctly determine the time of supply of services and avoid any penalty for non-compliance.

ITC on CSR Expenses & Income tax Treatment, Penalty for not fulfilling CSR obligations

ITC on CSR Expenses:

As per the GST law, input tax credit (ITC) can only be availed on the goods or services that are used for business purposes. Since CSR expenses are incurred for social welfare activities, they do not fall under the definition of business expenses, and hence ITC cannot be claimed on CSR expenses.

Income Tax Treatment of CSR Expenses:

Under the Income Tax Act, 1961, CSR expenses are treated as an application of income and are eligible for tax deduction. As per Section 80G of the Income Tax Act, contributions made to certain approved charitable institutions or funds are eligible for tax deduction. Similarly, CSR expenses incurred on approved activities are eligible for tax deduction under Section 37 of the Income Tax Act.

Penalty for Not Fulfilling CSR Obligations:

As per Section 135 of the Companies Act, 2013, companies with a net worth of at least Rs. 500 crore, a turnover of at least Rs. 1,000 crore, or a net profit of at least Rs. 5 crore are required to spend at least 2% of their average net profits over the preceding three years on CSR activities. The companies are required to disclose the details of their CSR activities in their annual report.

If a company fails to comply with its CSR obligations, it may face penalties as per Section 134 of the Companies Act, 2013. The penalty for non-compliance can range from a fine of Rs. 50,000 to Rs. 25 lakhs and imprisonment for up to three years for officers in default. In addition, non-compliance can also lead to reputational damage for the company.

Section 135 of companies Act, 2013 enshrines corporate social responsibility

Yes, that is correct. Section 135 of the Companies Act, 2013, enshrines the concept of Corporate Social Responsibility (CSR) for companies. It mandates certain companies to spend a minimum amount on CSR activities. The main objective of this provision is to encourage companies to engage in socially responsible activities and contribute to the well-being of society.

The section applies to companies meeting any of the following criteria in the immediately preceding financial year:

A net worth of Rs. 500 crore or more,

A turnover of Rs. 1000 crore or more, or

A net profit of Rs. 5 crore or more.

Such companies are required to spend at least 2% of their average net profits made during the three immediately preceding financial years on CSR activities. The activities that can be undertaken by companies as part of CSR include promoting education, eradicating hunger and poverty, ensuring environmental sustainability, and promoting gender equality, among others.

The companies are required to set up a CSR committee consisting of at least three directors, one of whom should be an independent director. The committee is responsible for formulating and recommending the CSR policy to the board. The board, in turn, is required to approve the policy and ensure that the company spends the required amount on CSR activities.

In conclusion, Section 135 of the Companies Act, 2013, is a significant provision that has helped promote the concept of CSR in India. It has led to the increased participation of companies in socially responsible activities and has contributed to the well-being of society.

Conclusion – CSR expenditure – Input Tax Credit – GST

In conclusion, Corporate Social Responsibility (CSR) expenditure is an important aspect of the social responsibility of companies. The government has made it mandatory for certain companies to spend a minimum amount on CSR activities as per Section 135 of the Companies Act, 2013.

Under the GST law, input tax credit (ITC) can only be claimed on goods or services that are used for business purposes. Since CSR expenditure is not incurred for business purposes, ITC cannot be claimed on such expenses. Therefore, companies cannot claim any GST paid on CSR expenses as input tax credit.

It is important for companies to ensure compliance with the provisions of the Companies Act, 2013, and GST law regarding CSR expenditure and input tax credit, respectively. Non-compliance can lead to penalties and reputational damage. Companies should also ensure that their CSR activities are aligned with their overall business objectives and contribute to the well-being of society.

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