The Gujarat Authority of Advance Ruling (AAR) has ruled that the Input Tax Credit (ITC) is not available on share buyback expenses.
The bench of P.B. Meena and Kamal Shukla has observed that the applicant is not eligible to avail the ITC involved in the expenditure incurred for buyback of its share and also required to reverse the ITC on common inputs and input services used in relation to the expenditure incurred for buyback of share.
The applicant, Gujarat Narmada Valley Fertilizers & Chemicals Limited, is a public limited company as per the Companies Act, 2013 and its shares are listed on the stock exchange. They had initiated a share buyback programme in December 2023. They are eligible for ITC on the expenditure incurred towards buyback of its shares; that the buyback of shares is an activity undertaken in the course or furtherance of business.
The applicant has further stated that buyback of shares improves company’s financial standing, creates value for shareholders, contributes prestige & promotes the Company’s image, reduces equity capital, leads to improved shareholders return; that it is a simple way to pay off investors & reduce the overall cost of capital. Thus, buyback extends beyond just acquiring shares.
The applicant sought the advance ruling on the issue whether the expenditure incurred by the applicant, a listed entity, for the buyback of its shares in the course of furtherance of business, is eligible for Input Tax Credit (ITC) under the GST regime?
The applicant’s argument is that the expenses incurred towards the buyback of shares is in the course or furtherance of the business activity and therefore, should be considered as eligible expenditure for the purpose of ITC.
The AAR held that The term ‘securities’ is excluded from both goods and services. The primary requirement for availability of ITC is not met.
Ruling Details
Applicant Name: Gujarat Narmada Valley Fertilizers & Chemicals Limited
Date: 25/03/2025
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