Guidance issued on claiming GST ITC for IPO-related expenses, covering fresh issues, OFS, promoter sales, and treatment of common costs under Rules 42/43.
GST ITC Eligibility for IPO-Related Expenditure
A series of rulings and authority pronouncements have clarified the eligibility of input tax credit (ITC) on expenses incurred during initial public offerings (IPOs), including fresh issues, offer for sale (OFS), and mixed models involving promoter sales.
Expenses directly attributable to a fresh issue of shares—such as underwriting commissions, registrar fees, and listing charges—are generally outside the scope of GST and hence not eligible for ITC. However, where services are used for both taxable and non-taxable purposes (e.g., common costs for investor presentations), a proportional reversal under Rules 42 and 43 of the CGST Rules applies.
Notably, ITC is available on costs related to due diligence, legal, and professional services if used for business activities that generate taxable supplies. The key is establishing a direct link between credit availed and taxable output.
Practitioners must carefully segregate expenses between those forming part of share capital and those supporting ongoing business operations. This distinction will determine ITC eligibility and help avoid future disputes during audits or assessments.
