ITC Eligibility

[Ethirajan Parthasarathy]

As per sec.16(1) of CGST Act, ITC is allowable on expenditure incurred used or intended to be used in the “course or furtherance of his business”.

My query is whether ITC on professional fee incurred in connection with buy back of shares or issue of shares by a limited company are eligible for credit.

[Vijay kumar]

Yes, eligible. As per Explanation to section 2(102) of the CGST Act'17 - For the removal of doubts, it is hereby clarified that the expression “services” includes facilitating or arranging transactions in securities. Thus, professional fee in respect of buyback of shares or issue of shares is a taxable supply and ITC thereon is covered by Section 16(1) and is not barred by Section 17(5).

[Shilpi Jain]

The buy back of shares or issue of shares cannot be looked as an end activity. It is not a case that these activities are not liable to gst so credit will not be eligible.

See the larger picture or rather the end use of the service. It is used for business purposes and that business, if it is involves taxable activity then itc will be eligible

[Amit Agrawal]

It is true that in terms of Section 16 (1), ITC is available against any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business.

As definition of 'Business' u/s 2 (17) is itself "inclusive / non-exhaustive definition' and is very wide and some relevant portion of the definition is reproduced below:

“business” includes––

(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;

(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);

(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;

(d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business;

........................................."

The activities of "buy back of shares or issue of shares" by a limited company falls within clause (b) of above definition of "business" (i.e. "the activity in connection with or incidental or ancillary to sub-clause (a) of above-said definition") in my view.

Hence, taxes charged on professional fee incurred in connection with buy back of shares or issue of shares by a limited company are eligible for ITC in my view u/s 16 (1).

This is strictly personal view of mine and the same should not be construed as professional advice / suggestion.

[YAGAY andSUN]

It would be interesting to see whether Buy Back of Shares will fit in the definition of in the course or furtherance of his business, may be interpretable by Court of Law.

[Amit Agrawal]

Lets take a situation, where a bank has charged an assessee a penalty against premature closure of business-loan and charged GST against such penalty.

(Please ignore the question whether bank is right or not in leaving the GST on this transaction, for purpose of this discussion).

If assessee is eligible to avail ITC against such GST charged by the bank (answer is 'yes', in my view), then, same is the case with "buy back of shares or issue of shares" by a limited company - in view of the inclusive and very-broad definition of 'business', in my humble view.

This is strictly personal view of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Please read 'levying' and not 'leaving' in second para of earlier post.

AI Summary

Input tax credit eligibility: professional fees for share buybacks and issuances may be creditable as securities facilitation services. ITC on professional fees for share buybacks or issuances is claimable where those fees constitute taxable services facilitating securities transactions and are used or intended to be used in the course or furtherance of business. The inclusive definition of business, which covers activities incidental or ancillary to commercial activity, supports treating buyback/issuance-related services as business expenditure eligible for input tax credit, subject to factual variation and interpretive dispute.